What does CAGR stand for?

CAGR stands for Compound Annual Growth Rate. It measures the annualized average growth rate of an investment over a multi-year period.

What is the formula for CAGR?

CAGR = (Ending Value / Beginning Value) ^ (1 / Years) - 1. It calculates the smoothed constant annual rate of return.

How does CAGR differ from average annual return?

Average annual return is a simple arithmetic average of annual returns. CAGR is a geometric average that accounts for compounding and the impact of losses, reflecting the real rate of return.

Does CAGR account for portfolio volatility?

No. CAGR smooths out annual fluctuations, assuming a constant rate of growth. It does not measure or reflect the risk or volatility of the underlying asset.

Is CAGR useful for comparing different investments?

Yes. CAGR annualized performance, allowing you to compare a 3-year investment directly against a 10-year investment on an equal annual basis.

Can I calculate CAGR for periods under one year?

Yes, but it is less common. You can use fractional years (e.g., 6 months = 0.5 years) in the formula, but annualized short-term returns can distort long-term expectations.

How do contributions affect CAGR calculations?

CAGR assumes a single lump sum is invested at the beginning and grows to the end. It does not easily account for ongoing deposits or withdrawals, which require calculating Internal Rate of Return (IRR).

What is a good CAGR for a stock portfolio?

Historically, a CAGR of 7% to 10% is considered strong for long-term equity portfolios, matching or exceeding historical index averages.

Why does a 50% total gain not equal a 50% CAGR?

A 50% total gain spread over several years compounds to a much smaller annual rate. CAGR converts the total percentage move into the single constant annual rate that, compounded year after year, would produce the same ending value — so the more years the gain took, the lower the CAGR relative to the total gain.

Can CAGR be used for business revenue growth, not just investments?

Yes. The same formula applies to any starting and ending value over time — company revenue, user counts, real estate prices, or portfolio balances — as long as you have a clean beginning figure, ending figure, and number of years between them.

finance calculator

CAGR Calculator

Calculate the compound annual growth rate between a starting and ending value to measure investment performance over time.

Compound annual growth rate is the constant yearly rate that would take a starting value to an ending value over a period: CAGR = (ending ÷ beginning)^(1 ÷ years) − 1. Growing from $10,000 to $18,000 over 5 years is a CAGR of about 12.5%, even if the actual year-to-year returns varied widely.

Formula Verified by Dr. Elizabeth Vance, PhD

Quick actions: Save inputs, view saved runs, print, share, or export results

Saved Runs

Inputs

Mode

Initial Value$

Final Value$

Number of Years

Results

CAGR

9.14%

Total Growth30.00%

Initial Value$1,000.00

Final Value$1,300.00

Period3 years

Tip

Save this page to compare investment performance, project future value at a target growth rate, or work out how much you need to start with.

Formula

CAGR formulas

CAGR = (FV / PV)^(1/t) − 1. Future Value = PV × (1 + CAGR)^t. Initial Value = FV / (1 + CAGR)^t.

CAGR smooths total growth into a single annualized rate. Rearrange the formula to solve for future value or initial value instead.

Step by step

How the calculation works

1Choose Calculate CAGR, Find Future Value, or Find Initial Value mode.
2Calculate CAGR: enter the initial value, final value, and number of years to find the annualized growth rate.
3Find Future Value: enter the initial value, target CAGR, and years to project the ending value.
4Find Initial Value: enter the final value, target CAGR, and years to find how much you need to start with.

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CAGR Calculator

Calculate the compound annual growth rate between a starting and ending value to measure investment performance over time.

Formula Verified by Dr. Elizabeth Vance, PhD

How to understand and use this calculator

Quick Answer

What is CAGR? CAGR (Compound Annual Growth Rate) is the average annual growth rate of an investment over a specific period, assuming profits are reinvested each year.

The formula: CAGR = (FV / PV)^(1/t) − 1

FV = Final Value
PV = Initial Value (Present Value)
t = Number of years/periods

Simple example: Initial Value = $1,000, Final Value = $1,300, Time = 3 years.

CAGR = ($1,300 / $1,000)^(1/3) − 1 = 9.14%

Key difference: CAGR is the average annual growth rate with compounding. Simple Growth Rate is just the total percentage increase over the whole period.

Use the CAGR Calculator

To use the CAGR calculator:

1. Choose Calculate CAGR, Find Future Value, or Find Initial Value mode.

2. Enter the initial value, final value, and number of periods (or CAGR, depending on the mode).

3. Review the CAGR, total growth, and step-by-step work.

Example input (Calculate CAGR): Initial Value = $1,000, Final Value = $1,300, Number of Years = 3.

Output: CAGR = 9.14% • Total Growth = 30.00% • Step-by-step work: (1300/1000)^(1/3) − 1 = 0.0914 = 9.14%.

Another example (Finding Future Value): Initial Value = $5,000, CAGR = 8%, Number of Years = 5.

Output: Future Value = $7,346.64 • Total Growth = 46.93% • Step-by-step work: $5,000 × (1.08)^5 = $7,346.64.

What is Compound Interest?

To understand CAGR, you first need to understand compound interest. Compound interest is interest earned not only on your initial investment but also on the interest you've already earned — in other words, you earn interest on interest.

Simple example (10% annual interest on $1,000):

Year 1: $1,000 × 10% = $100 → Balance: $1,100
Year 2: $1,100 × 10% = $110 → Balance: $1,210
Year 3: $1,210 × 10% = $121 → Balance: $1,331

Compound Interest Formula: FV = PV × (1 + r/m)^(m × t)

FV = Future Value
PV = Present Value (initial amount)
r = Annual interest rate
m = Compounding frequency per year
t = Number of years

The power of compounding, over 3 years at 10%:

Without compounding (simple interest): $1,000 + $300 = $1,300 total ($300 profit)
With compounding: $1,000 → $1,331 total ($331 profit)

That's $31 extra just from compounding!

What is CAGR?

CAGR (Compound Annual Growth Rate) is the average annual growth rate of an investment over a specific period, assuming profits are reinvested at the end of each year.

The formal definition: CAGR is the yearly rate of return required for an investment to grow from its initial balance to its final balance within a specific period, assuming profits are reinvested at the end of each year.

In simple terms: CAGR tells you the average annual growth rate as if your investment grew at a constant rate every year. It "smooths out" the actual returns to give you a single, comparable number.

Example: An investment grows from $1,000 to $1,300 over 3 years. CAGR = 9.14%. This means the investment grew at an average of 9.14% per year (with compounding).

CAGR vs Simple Growth Rate — What's the Difference?

Definition: CAGR is average annual growth with compounding. Simple Growth Rate (SGR) is the total percentage increase.

Formula: CAGR = (FV/PV)^(1/t) − 1. SGR = (FV − PV) / PV × 100.

Time horizon: CAGR works for any time period. SGR is usually stated for the whole period.

Compounding: CAGR accounts for compounding. SGR does NOT account for compounding.

Comparability: CAGR lets you compare different time periods. SGR is hard to compare across different time periods.

Value: CAGR is always lower than SGR for t > 1. SGR is higher than CAGR for t > 1.

Example: Investment: $1,000 → $1,300 over 3 years.

Simple Growth Rate = ($1,300 − $1,000) / $1,000 × 100 = 30.00%
CAGR = ($1,300 / $1,000)^(1/3) − 1 = 9.14%

Key insight: CAGR (9.14%) is lower than the simple growth rate divided by years (30% / 3 = 10%) because of compounding.

The CAGR Formula

The CAGR formula is derived from the compound interest formula:

CAGR = (FV / PV)^(1/t) − 1

FV = Final Value (ending value)
PV = Initial Value (present value, starting value)
t = Number of years/periods

Expanded version:

FV / PV = total growth factor
(FV / PV)^(1/t) = annual growth factor
− 1 converts it to a percentage

Example: FV = $1,300, PV = $1,000, t = 3.

CAGR = ($1,300 / $1,000)^(1/3) − 1 = (1.3)^(1/3) − 1 = 1.0914 − 1 = 0.0914 = 9.14%

How to Calculate CAGR — Step by Step

How to calculate CAGR is simple when you follow these steps:

Step 1: Identify the initial value (PV), final value (FV), and time period (t).

Step 2: Divide final value by initial value → FV / PV.

Step 3: Raise the result to the power of (1/t) → (FV / PV)^(1/t).

Step 4: Subtract 1 → (FV / PV)^(1/t) − 1.

Step 5: Convert to percentage by multiplying by 100.

Example: Big Bite Company (2012–2018). Investment value by year: 2012 = $310,000, 2013 = $325,000, 2014 = $330,000, 2015 = $345,000, 2016 = $390,000, 2017 = $395,000, 2018 = $450,000.

Step 1 — Identify values: PV = $310,000 (2012), FV = $450,000 (2018), t = 7 years (2012 to 2018).

Step 2 — Calculate: CAGR = ($450,000 / $310,000)^(1/7) − 1 = (1.4516)^(1/7) − 1 = 1.05468 − 1 = 0.05468 × 100 = 5.47%

Answer: the compound annual growth rate was 5.47%.

How to Use This Calculator to Find Future Value

Sometimes you know the CAGR and want to find the future value.

Formula: FV = PV × (1 + CAGR)^t

Step-by-step example:

Step 1: Identify the initial value, CAGR, and time → PV = $5,000, CAGR = 8% (0.08), t = 5 years.

Step 2: Apply the formula → FV = $5,000 × (1 + 0.08)^5 = $5,000 × (1.08)^5 = $5,000 × 1.4693 = $7,346.64

Answer: the future value is $7,346.64. Switch to "Find Future Value" mode above to try your own numbers.

How to Use This Calculator to Find Initial Value

Sometimes you know the CAGR and final value and want to find the initial value.

Formula: PV = FV / (1 + CAGR)^t

Step-by-step example:

Step 1: Identify the final value, CAGR, and time → FV = $10,000, CAGR = 10% (0.10), t = 5 years.

Step 2: Apply the formula → PV = $10,000 / (1 + 0.10)^5 = $10,000 / (1.10)^5 = $10,000 / 1.6105 = $6,209.21

Answer: the initial value was $6,209.21. Switch to "Find Initial Value" mode above to try your own numbers.

How to Calculate CAGR in Excel

The compounded growth rate formula in Excel is easy to implement.

Basic CAGR formula: = (FV / PV) ^ (1 / t) − 1

Step 1: Enter your data in cells — Initial Value (PV) in B1, Final Value (FV) in B2, Years (t) in B3.

Step 2: In cell B4, enter: = (B2/B1) ^ (1/B3) − 1

Step 3: Format the result cell as a percentage (right-click → Format Cells → Percentage).

Alternative — using the RRI function: Excel has a built-in function for CAGR: = RRI(periods, present_value, future_value). Example: =RRI(3, 1000, 1300) = 9.14%.

Advanced Excel usage:

Basic CAGR: =(FV/PV)^(1/t)-1
With cell references: =(B2/B1)^(1/B3)-1
Using RRI function: =RRI(B3, B1, B2)
Annualized growth: =(FV/PV)^(1/(end-start))-1
Monthly to annual: =(1+monthly_rate)^12-1

CAGR Advantages and Disadvantages

Advantages of CAGR:

Comparability: allows comparison of investments with different time periods.
Smoothing: smooths out volatility to give a single number.
Compound interest accounted: reflects the power of compounding.
Performance measurement: an easy way to measure investment performance.
Industry standard: widely used in finance and business.

Disadvantages of CAGR:

Doesn't show volatility: ignores the ups and downs along the way.
Assumes constant growth: rarely happens in real life.
Ignores risk: two investments with the same CAGR can have very different risk.
Limitation of representation: can be misleading if the period is short.
Doesn't account for cash flows: only uses initial and final values.

Example of the CAGR limitation: Investment value by year — 2014 = $5,500, 2015 = $4,000, 2016 = $3,000, 2017 = $4,200, 2018 = $6,000.

3-year CAGR (2015–2018) = ($6,000 / $3,000)^(1/3) − 1 = 25.99%
5-year CAGR (2014–2018) = ($6,000 / $5,500)^(1/5) − 1 = 1.76%

The same investment looks very different depending on the time period you choose!

Real-World CAGR Examples

Example 1: Stock Market Investment. Initial Investment = $10,000, Final Value = $16,105, Years = 5 → CAGR = 10.00%

Example 2: Business Revenue Growth. Initial Revenue = $500,000, Final Revenue = $1,000,000, Years = 7 → CAGR = 10.41%

Example 3: Real Estate. Initial Value = $200,000, Final Value = $350,000, Years = 8 → CAGR = 7.25%

Example 4: SaaS Company. Initial ARR = $1,000,000, Final ARR = $5,000,000, Years = 4 → CAGR = 49.53%

Practice Problems

Problem 1: You invest $5,000 and after 5 years it grows to $7,000. What is the CAGR? Solution: CAGR = ($7,000 / $5,000)^(1/5) − 1 = (1.4)^(1/5) − 1 = 6.96%.

Problem 2: A company's revenue grew from $2,000,000 to $3,000,000 over 4 years. What is the CAGR? Solution: CAGR = ($3,000,000 / $2,000,000)^(1/4) − 1 = (1.5)^(1/4) − 1 = 10.67%.

Problem 3: You want $50,000 in 10 years. Your current investment is $25,000. What CAGR do you need? Solution: CAGR = ($50,000 / $25,000)^(1/10) − 1 = (2)^(1/10) − 1 = 7.18%.

Problem 4: An investment of $10,000 grows at 8% CAGR for 6 years. What is the final value? Solution: FV = $10,000 × (1.08)^6 = $10,000 × 1.5869 = $15,868.74.

Problem 5: A company wants to grow from $100,000 to $200,000 in 5 years. What CAGR is needed? Solution: CAGR = ($200,000 / $100,000)^(1/5) − 1 = (2)^(1/5) − 1 = 14.87%.

Answers: 1) 6.96% — 2) 10.67% — 3) 7.18% — 4) $15,868.74 — 5) 14.87%

Common CAGR Mistakes

Using the wrong number of periods. Mistake: miscounting the years. Fix: count the number of years between start and end — 2012 to 2018 is 7 periods.
Forgetting to account for compounding. Mistake: dividing total growth by years. Fix: use the CAGR formula with the exponent, not simple division.
Using CAGR for short periods. Mistake: using CAGR for 1 year — that's just the growth rate. Fix: use CAGR for periods of 2 years or more.
Comparing CAGR of different time periods. Mistake: comparing a 3-year CAGR with a 5-year CAGR directly. Fix: only compare CAGR calculated over the same time period.
Not considering volatility. Mistake: assuming constant growth every year. Fix: look at the actual year-by-year returns, not just the smoothed average.
Using CAGR with irregular cash flows. Mistake: using CAGR when there are deposits or withdrawals along the way. Fix: use IRR or XIRR instead.
Formatting error in Excel. Mistake: not using the correct formula syntax. Fix: use =(FV/PV)^(1/t)-1 or =RRI(t, PV, FV).
Not checking the answer. Mistake: assuming the calculation is correct. Fix: verify by plugging the CAGR back into the formula: PV × (1 + CAGR)^t should equal FV.

What This Calculator Can and Cannot Do

This calculator CAN help with:

Calculating CAGR from initial and final values
Finding future value with a target CAGR
Finding initial value needed to reach a target with a given CAGR
Comparing different investments
Business performance analysis
Investment planning
Understanding growth rates

This calculator CANNOT do:

Account for irregular cash flows (use IRR instead)
Calculate volatility or risk
Predict future returns
Replace professional financial advice
Account for inflation (use real/inflation-adjusted CAGR)
Handle monthly or quarterly data directly — convert to annual first

Final Summary

A CAGR calculator is essential for anyone investing, analyzing business growth, or comparing investment performance. Understanding how to calculate CAGR — and knowing the difference between CAGR and simple growth rate — helps you make informed investment decisions.

Remember the key formulas:

CAGR: (FV / PV)^(1/t) − 1
Future Value: PV × (1 + CAGR)^t
Initial Value: FV / (1 + CAGR)^t

Quick reference:

$1,000 → $1,300 over 3 years → CAGR = 9.14%
$10,000 at 8% for 5 years → FV = $14,693.28
$500,000 doubling to $1,000,000 in 7 years → CAGR needed = 10.41%

Start calculating now — just enter your values above and get instant results, completely free.

Related concepts

Compound Annual Growth Rate (CAGR)

The average annual growth rate of an investment over a period, assuming profits are reinvested each year.

Simple Growth Rate (SGR)

The total percentage increase over a period, without accounting for compounding: (FV − PV) / PV × 100.

Internal Rate of Return (IRR)

A growth-rate measure that accounts for irregular cash flows, such as periodic deposits or withdrawals.

Rule of 72

A quick estimate for how many years it takes an investment to double: divide 72 by the annual growth rate.

Frequently Asked Questions

What is CAGR?+

CAGR (Compound Annual Growth Rate) is the average annual growth rate of an investment over a specific period, assuming profits are reinvested each year.

What is the CAGR formula?+

CAGR = (FV / PV)^(1/t) − 1, where FV = Final Value, PV = Initial Value, and t = number of years.

How do I calculate CAGR?+

Divide final value by initial value, raise the result to the power of (1/t), subtract 1, and multiply by 100.

What is the difference between CAGR and simple growth rate?+

CAGR accounts for compounding and is annualized. Simple growth rate is the total percentage increase over the entire period, without compounding.

What is CAGR in Excel?+

In Excel, use =(FV/PV)^(1/t)-1 or the built-in =RRI(t, PV, FV) function to calculate CAGR.

How do I calculate CAGR in Excel with a formula?+

Use =(B2/B1)^(1/B3)-1, where B1 = PV, B2 = FV, and B3 = Years.

What is the compounded growth rate formula in Excel?+

The compounded growth rate formula in Excel is =(FV/PV)^(1/t)-1, or you can use the RRI function directly.

Is CAGR the same as average annual return?+

CAGR is similar but accounts for compounding. Average annual return is a simple average, which doesn't account for compounding.

What is a good CAGR?+

A good CAGR depends on the investment type. Generally, 7–10% is considered good for long-term stock investments.

Can CAGR be negative?+

Yes, CAGR can be negative if the final value is less than the initial value, meaning the investment lost money.

What is the difference between CAGR and IRR?+

CAGR is for steady growth without cash flows. IRR (Internal Rate of Return) accounts for irregular cash flows like deposits and withdrawals.

How do I convert monthly growth to CAGR?+

Annualize it using: Annual rate = (1 + monthly rate)^12 − 1.

What is the rule of 72?+

The rule of 72 estimates how long it takes to double your money: Years ≈ 72 / CAGR (expressed as a whole number, e.g., 8 for 8%).

Is this CAGR calculator free?+

Yes — completely free with no registration required.

How the calculation works

1Choose Calculate CAGR, Find Future Value, or Find Initial Value mode.

2Calculate CAGR: enter the initial value, final value, and number of years to find the annualized growth rate.

3Find Future Value: enter the initial value, target CAGR, and years to project the ending value.

4Find Initial Value: enter the final value, target CAGR, and years to find how much you need to start with.

How to understand and use this calculator

Quick Answer

What is CAGR? CAGR (Compound Annual Growth Rate) is the average annual growth rate of an investment over a specific period, assuming profits are reinvested each year.

The formula: CAGR = (FV / PV)^(1/t) − 1

FV = Final Value
PV = Initial Value (Present Value)
t = Number of years/periods

Simple example: Initial Value = $1,000, Final Value = $1,300, Time = 3 years.

CAGR = ($1,300 / $1,000)^(1/3) − 1 = 9.14%

Key difference: CAGR is the average annual growth rate with compounding. Simple Growth Rate is just the total percentage increase over the whole period.

Use the CAGR Calculator

To use the CAGR calculator:

1. Choose Calculate CAGR, Find Future Value, or Find Initial Value mode.

2. Enter the initial value, final value, and number of periods (or CAGR, depending on the mode).

3. Review the CAGR, total growth, and step-by-step work.

Example input (Calculate CAGR): Initial Value = $1,000, Final Value = $1,300, Number of Years = 3.

Output: CAGR = 9.14% • Total Growth = 30.00% • Step-by-step work: (1300/1000)^(1/3) − 1 = 0.0914 = 9.14%.

Another example (Finding Future Value): Initial Value = $5,000, CAGR = 8%, Number of Years = 5.

Output: Future Value = $7,346.64 • Total Growth = 46.93% • Step-by-step work: $5,000 × (1.08)^5 = $7,346.64.

What is Compound Interest?

Simple example (10% annual interest on $1,000):

Year 1: $1,000 × 10% = $100 → Balance: $1,100
Year 2: $1,100 × 10% = $110 → Balance: $1,210
Year 3: $1,210 × 10% = $121 → Balance: $1,331

Compound Interest Formula: FV = PV × (1 + r/m)^(m × t)

FV = Future Value
PV = Present Value (initial amount)
r = Annual interest rate
m = Compounding frequency per year
t = Number of years

The power of compounding, over 3 years at 10%:

Without compounding (simple interest): $1,000 + $300 = $1,300 total ($300 profit)
With compounding: $1,000 → $1,331 total ($331 profit)

That's $31 extra just from compounding!

What is CAGR?

CAGR (Compound Annual Growth Rate) is the average annual growth rate of an investment over a specific period, assuming profits are reinvested at the end of each year.

Example: An investment grows from $1,000 to $1,300 over 3 years. CAGR = 9.14%. This means the investment grew at an average of 9.14% per year (with compounding).

CAGR vs Simple Growth Rate — What's the Difference?

Definition: CAGR is average annual growth with compounding. Simple Growth Rate (SGR) is the total percentage increase.

Formula: CAGR = (FV/PV)^(1/t) − 1. SGR = (FV − PV) / PV × 100.

Time horizon: CAGR works for any time period. SGR is usually stated for the whole period.

Compounding: CAGR accounts for compounding. SGR does NOT account for compounding.

Comparability: CAGR lets you compare different time periods. SGR is hard to compare across different time periods.

Value: CAGR is always lower than SGR for t > 1. SGR is higher than CAGR for t > 1.

Example: Investment: $1,000 → $1,300 over 3 years.

Simple Growth Rate = ($1,300 − $1,000) / $1,000 × 100 = 30.00%
CAGR = ($1,300 / $1,000)^(1/3) − 1 = 9.14%

Key insight: CAGR (9.14%) is lower than the simple growth rate divided by years (30% / 3 = 10%) because of compounding.

The CAGR Formula

The CAGR formula is derived from the compound interest formula:

CAGR = (FV / PV)^(1/t) − 1

FV = Final Value (ending value)
PV = Initial Value (present value, starting value)
t = Number of years/periods

Expanded version:

FV / PV = total growth factor
(FV / PV)^(1/t) = annual growth factor
− 1 converts it to a percentage

Example: FV = $1,300, PV = $1,000, t = 3.

CAGR = ($1,300 / $1,000)^(1/3) − 1 = (1.3)^(1/3) − 1 = 1.0914 − 1 = 0.0914 = 9.14%

How to Calculate CAGR — Step by Step

How to calculate CAGR is simple when you follow these steps:

Step 1: Identify the initial value (PV), final value (FV), and time period (t).

Step 2: Divide final value by initial value → FV / PV.

Step 3: Raise the result to the power of (1/t) → (FV / PV)^(1/t).

Step 4: Subtract 1 → (FV / PV)^(1/t) − 1.

Step 5: Convert to percentage by multiplying by 100.

Example: Big Bite Company (2012–2018). Investment value by year: 2012 = $310,000, 2013 = $325,000, 2014 = $330,000, 2015 = $345,000, 2016 = $390,000, 2017 = $395,000, 2018 = $450,000.

Step 1 — Identify values: PV = $310,000 (2012), FV = $450,000 (2018), t = 7 years (2012 to 2018).

Step 2 — Calculate: CAGR = ($450,000 / $310,000)^(1/7) − 1 = (1.4516)^(1/7) − 1 = 1.05468 − 1 = 0.05468 × 100 = 5.47%

Answer: the compound annual growth rate was 5.47%.

How to Use This Calculator to Find Future Value

Sometimes you know the CAGR and want to find the future value.

Formula: FV = PV × (1 + CAGR)^t

Step-by-step example:

Step 1: Identify the initial value, CAGR, and time → PV = $5,000, CAGR = 8% (0.08), t = 5 years.

Step 2: Apply the formula → FV = $5,000 × (1 + 0.08)^5 = $5,000 × (1.08)^5 = $5,000 × 1.4693 = $7,346.64

Answer: the future value is $7,346.64. Switch to "Find Future Value" mode above to try your own numbers.

How to Use This Calculator to Find Initial Value

Sometimes you know the CAGR and final value and want to find the initial value.

Formula: PV = FV / (1 + CAGR)^t

Step-by-step example:

Step 1: Identify the final value, CAGR, and time → FV = $10,000, CAGR = 10% (0.10), t = 5 years.

Step 2: Apply the formula → PV = $10,000 / (1 + 0.10)^5 = $10,000 / (1.10)^5 = $10,000 / 1.6105 = $6,209.21

Answer: the initial value was $6,209.21. Switch to "Find Initial Value" mode above to try your own numbers.

How to Calculate CAGR in Excel

The compounded growth rate formula in Excel is easy to implement.

Basic CAGR formula: = (FV / PV) ^ (1 / t) − 1

Step 1: Enter your data in cells — Initial Value (PV) in B1, Final Value (FV) in B2, Years (t) in B3.

Step 2: In cell B4, enter: = (B2/B1) ^ (1/B3) − 1

Step 3: Format the result cell as a percentage (right-click → Format Cells → Percentage).

Alternative — using the RRI function: Excel has a built-in function for CAGR: = RRI(periods, present_value, future_value). Example: =RRI(3, 1000, 1300) = 9.14%.

Advanced Excel usage:

Basic CAGR: =(FV/PV)^(1/t)-1
With cell references: =(B2/B1)^(1/B3)-1
Using RRI function: =RRI(B3, B1, B2)
Annualized growth: =(FV/PV)^(1/(end-start))-1
Monthly to annual: =(1+monthly_rate)^12-1

CAGR Advantages and Disadvantages

Advantages of CAGR:

Comparability: allows comparison of investments with different time periods.
Smoothing: smooths out volatility to give a single number.
Compound interest accounted: reflects the power of compounding.
Performance measurement: an easy way to measure investment performance.
Industry standard: widely used in finance and business.

Disadvantages of CAGR:

Doesn't show volatility: ignores the ups and downs along the way.
Assumes constant growth: rarely happens in real life.
Ignores risk: two investments with the same CAGR can have very different risk.
Limitation of representation: can be misleading if the period is short.
Doesn't account for cash flows: only uses initial and final values.

Example of the CAGR limitation: Investment value by year — 2014 = $5,500, 2015 = $4,000, 2016 = $3,000, 2017 = $4,200, 2018 = $6,000.

3-year CAGR (2015–2018) = ($6,000 / $3,000)^(1/3) − 1 = 25.99%
5-year CAGR (2014–2018) = ($6,000 / $5,500)^(1/5) − 1 = 1.76%

The same investment looks very different depending on the time period you choose!

Real-World CAGR Examples

Example 1: Stock Market Investment. Initial Investment = $10,000, Final Value = $16,105, Years = 5 → CAGR = 10.00%

Example 2: Business Revenue Growth. Initial Revenue = $500,000, Final Revenue = $1,000,000, Years = 7 → CAGR = 10.41%

Example 3: Real Estate. Initial Value = $200,000, Final Value = $350,000, Years = 8 → CAGR = 7.25%

Example 4: SaaS Company. Initial ARR = $1,000,000, Final ARR = $5,000,000, Years = 4 → CAGR = 49.53%

Practice Problems

Problem 1: You invest $5,000 and after 5 years it grows to $7,000. What is the CAGR? Solution: CAGR = ($7,000 / $5,000)^(1/5) − 1 = (1.4)^(1/5) − 1 = 6.96%.

Problem 2: A company's revenue grew from $2,000,000 to $3,000,000 over 4 years. What is the CAGR? Solution: CAGR = ($3,000,000 / $2,000,000)^(1/4) − 1 = (1.5)^(1/4) − 1 = 10.67%.

Problem 3: You want $50,000 in 10 years. Your current investment is $25,000. What CAGR do you need? Solution: CAGR = ($50,000 / $25,000)^(1/10) − 1 = (2)^(1/10) − 1 = 7.18%.

Problem 4: An investment of $10,000 grows at 8% CAGR for 6 years. What is the final value? Solution: FV = $10,000 × (1.08)^6 = $10,000 × 1.5869 = $15,868.74.

Problem 5: A company wants to grow from $100,000 to $200,000 in 5 years. What CAGR is needed? Solution: CAGR = ($200,000 / $100,000)^(1/5) − 1 = (2)^(1/5) − 1 = 14.87%.

Answers: 1) 6.96% — 2) 10.67% — 3) 7.18% — 4) $15,868.74 — 5) 14.87%

Common CAGR Mistakes

Using the wrong number of periods. Mistake: miscounting the years. Fix: count the number of years between start and end — 2012 to 2018 is 7 periods.
Forgetting to account for compounding. Mistake: dividing total growth by years. Fix: use the CAGR formula with the exponent, not simple division.
Using CAGR for short periods. Mistake: using CAGR for 1 year — that's just the growth rate. Fix: use CAGR for periods of 2 years or more.
Comparing CAGR of different time periods. Mistake: comparing a 3-year CAGR with a 5-year CAGR directly. Fix: only compare CAGR calculated over the same time period.
Not considering volatility. Mistake: assuming constant growth every year. Fix: look at the actual year-by-year returns, not just the smoothed average.
Using CAGR with irregular cash flows. Mistake: using CAGR when there are deposits or withdrawals along the way. Fix: use IRR or XIRR instead.
Formatting error in Excel. Mistake: not using the correct formula syntax. Fix: use =(FV/PV)^(1/t)-1 or =RRI(t, PV, FV).
Not checking the answer. Mistake: assuming the calculation is correct. Fix: verify by plugging the CAGR back into the formula: PV × (1 + CAGR)^t should equal FV.

What This Calculator Can and Cannot Do

This calculator CAN help with:

Calculating CAGR from initial and final values
Finding future value with a target CAGR
Finding initial value needed to reach a target with a given CAGR
Comparing different investments
Business performance analysis
Investment planning
Understanding growth rates

This calculator CANNOT do:

Account for irregular cash flows (use IRR instead)
Calculate volatility or risk
Predict future returns
Replace professional financial advice
Account for inflation (use real/inflation-adjusted CAGR)
Handle monthly or quarterly data directly — convert to annual first

Final Summary

Remember the key formulas:

CAGR: (FV / PV)^(1/t) − 1
Future Value: PV × (1 + CAGR)^t
Initial Value: FV / (1 + CAGR)^t

Quick reference:

$1,000 → $1,300 over 3 years → CAGR = 9.14%
$10,000 at 8% for 5 years → FV = $14,693.28
$500,000 doubling to $1,000,000 in 7 years → CAGR needed = 10.41%

Start calculating now — just enter your values above and get instant results, completely free.

Related concepts

Compound Annual Growth Rate (CAGR)

The average annual growth rate of an investment over a period, assuming profits are reinvested each year.

Simple Growth Rate (SGR)

The total percentage increase over a period, without accounting for compounding: (FV − PV) / PV × 100.

Internal Rate of Return (IRR)

A growth-rate measure that accounts for irregular cash flows, such as periodic deposits or withdrawals.

Rule of 72

A quick estimate for how many years it takes an investment to double: divide 72 by the annual growth rate.

Frequently Asked Questions

What is CAGR?+

CAGR (Compound Annual Growth Rate) is the average annual growth rate of an investment over a specific period, assuming profits are reinvested each year.

What is the CAGR formula?+

CAGR = (FV / PV)^(1/t) − 1, where FV = Final Value, PV = Initial Value, and t = number of years.

How do I calculate CAGR?+

Divide final value by initial value, raise the result to the power of (1/t), subtract 1, and multiply by 100.

What is the difference between CAGR and simple growth rate?+

CAGR accounts for compounding and is annualized. Simple growth rate is the total percentage increase over the entire period, without compounding.

What is CAGR in Excel?+

In Excel, use =(FV/PV)^(1/t)-1 or the built-in =RRI(t, PV, FV) function to calculate CAGR.

How do I calculate CAGR in Excel with a formula?+

Use =(B2/B1)^(1/B3)-1, where B1 = PV, B2 = FV, and B3 = Years.

What is the compounded growth rate formula in Excel?+

The compounded growth rate formula in Excel is =(FV/PV)^(1/t)-1, or you can use the RRI function directly.

Is CAGR the same as average annual return?+

CAGR is similar but accounts for compounding. Average annual return is a simple average, which doesn't account for compounding.

What is a good CAGR?+

A good CAGR depends on the investment type. Generally, 7–10% is considered good for long-term stock investments.

Can CAGR be negative?+

Yes, CAGR can be negative if the final value is less than the initial value, meaning the investment lost money.

What is the difference between CAGR and IRR?+

CAGR is for steady growth without cash flows. IRR (Internal Rate of Return) accounts for irregular cash flows like deposits and withdrawals.

How do I convert monthly growth to CAGR?+

Annualize it using: Annual rate = (1 + monthly rate)^12 − 1.

What is the rule of 72?+

The rule of 72 estimates how long it takes to double your money: Years ≈ 72 / CAGR (expressed as a whole number, e.g., 8 for 8%).

Is this CAGR calculator free?+

Yes — completely free with no registration required.

CAGR Calculator

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CAGR Calculator

Inputs

Results

Key output metrics

Initial value vs. final value

Smoothed compound trajectory

How to understand and use this calculator

Quick Answer

Use the CAGR Calculator

What is Compound Interest?

What is CAGR?

CAGR vs Simple Growth Rate — What's the Difference?

The CAGR Formula

How to Calculate CAGR — Step by Step

How to Use This Calculator to Find Future Value

How to Use This Calculator to Find Initial Value

How to Calculate CAGR in Excel

CAGR Advantages and Disadvantages

Real-World CAGR Examples

Practice Problems

Common CAGR Mistakes

What This Calculator Can and Cannot Do

Final Summary

Related concepts

Frequently Asked Questions

CAGR formulas

How the calculation works

Learn more about this calculation

Compound Interest: Formula, Examples, and Calculator

Simple vs Compound Interest: Linear Growth vs Interest on Interest

Investment Calculator

Compound Interest Calculator

ROI Calculator

Bond Yield Calculator

Stock Profit Calculator

Savings Calculator

Key output metrics

Initial value vs. final value

Smoothed compound trajectory

How to understand and use this calculator

Quick Answer

Use the CAGR Calculator

What is Compound Interest?

What is CAGR?

CAGR vs Simple Growth Rate — What's the Difference?

The CAGR Formula

How to Calculate CAGR — Step by Step

How to Use This Calculator to Find Future Value

How to Use This Calculator to Find Initial Value

How to Calculate CAGR in Excel

CAGR Advantages and Disadvantages

Real-World CAGR Examples

Practice Problems

Common CAGR Mistakes

What This Calculator Can and Cannot Do

Final Summary

Related concepts

Frequently Asked Questions