Compound Annual Growth Rate (CAGR)

Introduction to Compound Annual Growth Rate Calculator

The Compound Annual Growth Rate (CAGR) is a measure of the mean annual growth rate of an investment over a specified time period longer than one year. It represents one of the most accurate ways to calculate and determine returns for anything that can rise or fall in value over time.

Mathematical Background:

CAGR is calculated by taking the nth root of the total percentage growth rate, where n is the number of years. The formula is:

CAGR = (finalValue / initialValue)^(1 / numberOfYears) - 1

This formula assumes and requires a positive initial value, a positive final value, and a positive time period in years.

Practical Applications:

CAGR is often used to assess the performance of investments or business growth across different timeframes. It allows investors to compare the performance of different investments, and businesses use it to evaluate the success of various projects or the overall company growth over time.