Compound Annual Growth Rate (CAGR) Formula

Compound Annual Growth Rate (CAGR) Formula is used by investors and management to compare the investment based on their return. A high percentage result of CAGR formula is better the low percentage result and this formula can be calculated by dividing the investment’s ending value by beginning value to find total growth rate. this is then taken to Nth root where the N represents the number of years money has invested. At the end 1 is subtracted from the product to arrive at the CAGR percentage.

The above formula seems a little complex at first but when you calculate the example’s value through this formula then you realize that calculation through formula is simple.

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