function calculateExcelROR() {
// Get input values
var startVal = parseFloat(document.getElementById('initialVal').value);
var endVal = parseFloat(document.getElementById('finalVal').value);
var divs = parseFloat(document.getElementById('dividends').value);
var years = parseFloat(document.getElementById('periodYears').value);
// Validation
if (isNaN(startVal) || isNaN(endVal)) {
alert("Please enter valid numbers for Initial and Ending values.");
return;
}
if (startVal === 0) {
alert("Initial value cannot be zero.");
return;
}
if (isNaN(divs)) divs = 0;
// Logic specific to Rate of Return
// 1. Total Gain ($)
// Formula: (Ending Value + Dividends) – Initial Value
var totalGainVal = (endVal + divs) – startVal;
// 2. Simple Return (%)
// Formula: (Total Gain / Initial Value) * 100
var simpleROI = (totalGainVal / startVal) * 100;
// 3. CAGR (%)
// Excel Logic: =((Ending + Dividends) / Initial)^(1/Years) – 1
// JavaScript Math: Math.pow(ratio, 1/years) – 1
var cagrVal = 0;
var totalEndVal = endVal + divs;
if (years > 0 && startVal > 0 && totalEndVal > 0) {
var ratio = totalEndVal / startVal;
var exponent = 1 / years;
cagrVal = (Math.pow(ratio, exponent) – 1) * 100;
} else {
cagrVal = 0; // Handle edge cases where CAGR isn't applicable
}
// Display Results
document.getElementById('rorResult').style.display = 'block';
// Formatting function for currency
var formatter = new Intl.NumberFormat('en-US', {
style: 'currency',
currency: 'USD',
});
document.getElementById('totalGain').innerHTML = formatter.format(totalGainVal);
document.getElementById('simpleReturn').innerHTML = simpleROI.toFixed(2) + "%";
if (years > 0) {
document.getElementById('cagrResult').innerHTML = cagrVal.toFixed(2) + "%";
} else {
document.getElementById('cagrResult').innerHTML = "N/A (Requires Years > 0)";
}
}
Excel Formula to Calculate Rate of Return: A Comprehensive Guide
Calculating the rate of return on an investment is crucial for analyzing financial performance. While the calculator above provides instant results, understanding the underlying Excel formulas allows you to build your own robust financial models. Below, we break down the specific Excel functions used to calculate Simple Return (ROI) and Compound Annual Growth Rate (CAGR).
1. The Simple Rate of Return Formula
The Simple Rate of Return, often called ROI (Return on Investment), calculates the percentage growth of an investment without considering the time period. This is best used for short-term investments or when you simply want to know the total percentage gain.
The Mathematical Logic
The core concept is to find the net profit and divide it by the cost of the investment.
ROI = (Current Value - Original Value) / Original Value
Excel Syntax
If your Original Value is in cell A1 and your Current Value is in cell B1, the formula is:
=(B1 - A1) / A1
Note: If you received dividends, add them to the Current Value: =((B1 + Dividends) - A1) / A1.
2. Calculating CAGR (Compound Annual Growth Rate) in Excel
When comparing investments held for different periods (e.g., one held for 3 years vs. 5 years), Simple Return is misleading. You need the Compound Annual Growth Rate (CAGR), which smooths out the return to an annual percentage.
Option A: The RRI Function
Excel has a built-in function specifically for this called RRI. This is the cleanest method.
Syntax:=RRI(nper, pv, fv)
nper: The number of periods (years).
pv: Present Value (Initial Investment).
fv: Future Value (Ending Value).
Option B: The Power Formula
If you are using an older version of Excel or prefer manual math, you can use the exponent operator (^).
=(FV / PV)^(1 / n) - 1
If your years are in C1, Initial Investment in A1, and Ending Value in B1:
=(B1 / A1)^(1 / C1) - 1
3. Handling Irregular Cash Flows: The XIRR Function
The formulas above assume a single buy-in and a single exit. However, real-world investing often involves depositing and withdrawing money at different times. For this, the XIRR function is the gold standard.
Syntax:=XIRR(values, dates)
values: A range of cells containing cash flows (Outflows must be negative, Inflows positive).
dates: A corresponding range of dates for each cash flow.
Summary of Excel Formulas
Metric
Excel Formula Example
Use Case
Simple Growth
=(B1-A1)/A1
Total gain percentage regardless of time.
CAGR (Easy)
=RRI(Years, Start, End)
Annualized return for a lump sum.
CAGR (Manual)
=(End/Start)^(1/Years)-1
Annualized return manually calculated.
Irregular Flows
=XIRR(Values, Dates)
Complex portfolios with multiple deposits.
Conclusion
Whether you use the manual calculation method (End-Start)/Start or advanced functions like RRI, Excel is a powerful tool for tracking investment performance. Use the calculator at the top of this page to verify your Excel formulas and ensure your financial analysis is accurate.