Compound Growth Rate Calculator

Compound Annual Growth Rate (CAGR) Calculator

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Compound Annual Growth Rate

function calculateCAGR() { var startVal = parseFloat(document.getElementById('beginningValue').value); var endVal = parseFloat(document.getElementById('endingValue').value); var periods = parseFloat(document.getElementById('numPeriods').value); var resultDiv = document.getElementById('cagrResult'); var errorDiv = document.getElementById('cagrError'); errorDiv.style.display = 'none'; resultDiv.style.display = 'none'; if (isNaN(startVal) || isNaN(endVal) || isNaN(periods)) { errorDiv.innerText = "Please enter valid numbers for all fields."; errorDiv.style.display = 'block'; return; } if (startVal <= 0) { errorDiv.innerText = "Beginning value must be greater than zero."; errorDiv.style.display = 'block'; return; } if (periods <= 0) { errorDiv.innerText = "Number of periods must be greater than zero."; errorDiv.style.display = 'block'; return; } // CAGR Formula: ((End / Start)^(1 / Periods) – 1) * 100 var cagr = (Math.pow((endVal / startVal), (1 / periods)) – 1) * 100; var totalGrowth = ((endVal – startVal) / startVal) * 100; document.getElementById('totalGrowthPct').innerText = totalGrowth.toFixed(2) + "%"; document.getElementById('cagrRatePct').innerText = cagr.toFixed(2) + "%"; resultDiv.style.display = 'block'; }

Understanding Compound Annual Growth Rate (CAGR)

The Compound Annual Growth Rate (CAGR) is one of the most accurate ways to calculate and determine returns for anything that can rise or fall in value over time. Unlike a simple average growth rate, CAGR accounts for the effect of compounding, providing a "smoothed" annual rate of return.

The CAGR Formula

CAGR = [(Ending Value / Beginning Value)^{(1 / Number of Years)} – 1] × 100

Why Use CAGR Instead of Average Growth?

Standard average growth rates can be misleading. For example, if an investment grows 50% in year one and drops 50% in year two, the "average" growth is 0%. However, in reality, you would have lost 25% of your initial capital. CAGR correctly reflects the actual geometric progression of your value over time.

Real-World Example

Imagine you invested in a portfolio that had the following progression:

• Initial Value: 5,000
• Final Value (after 3 years): 7,500

Using the CAGR calculation:

1. Divide Ending Value by Beginning Value: 7,500 / 5,000 = 1.5
2. Raise to the power of 1/N (3 years): 1.5^0.333 = 1.1447
3. Subtract 1 and multiply by 100: (1.1447 – 1) × 100 = 14.47%

This means your investment grew at a compounded rate of 14.47% every year for three years.

When to Use This Calculator

CAGR is widely used in finance and business for:

• Comparing the performance of different stocks or mutual funds.
• Tracking business revenue growth over several fiscal years.
• Projecting future values based on historical trends.
• Evaluating the growth of website traffic or user acquisition.

Note: CAGR indicates a smooth growth rate but does not account for volatility or the "risk" taken during the period. It assumes all gains were reinvested throughout the duration.