Cagr formula excel

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In Excel, you can easily calculate the Compound Annual Growth Rate (CAGR) using a simple formula. There is a built-in Excel formula you can use to calculate CAGR directly, but you can also manually apply the standard CAGR formula.

CAGR Formula in Excel:

The formula for CAGR is:CAGR=(FVPV)1n−1\text{CAGR} = \left( \frac{\text{FV}}{\text{PV}} \right)^{\frac{1}{n}} – 1CAGR=(PVFV​)n1​−1

Where:

  • FV = Future Value (the value of the investment at the end of the period)
  • PV = Present Value (the initial value of the investment)
  • n = Number of years (or periods)

Steps to Calculate CAGR in Excel:

  1. Enter your data:
    • In cell A1, enter the Present Value (PV).
    • In cell A2, enter the Future Value (FV).
    • In cell A3, enter the number of periods (n) (in years or another time unit).
  2. Use the CAGR formula in Excel: In cell A4, enter the following formula:excelCopyEdit=((A2/A1)^(1/A3))-1 This formula will calculate the CAGR as a decimal. If you want to display the result as a percentage, simply format the cell as a percentage.

Example:

Suppose you have the following values:

  • Present Value (PV) = 1,000 (in cell A1)
  • Future Value (FV) = 1,500 (in cell A2)
  • Number of Years (n) = 3 (in cell A3)

In cell A4, enter:

excelCopyEdit=((A2/A1)^(1/A3))-1

The result will be 0.1447, which is equivalent to 14.47%.

Alternative Excel Formula: Using the RATE Function

You can also use Excel’s built-in RATE function to calculate CAGR, which is designed for more complex scenarios, like calculating the rate of return for investments with regular contributions or withdrawals.

The formula is:

excelCopyEdit=RATE(n, 0, -PV, FV)

Where:

  • n = Number of periods
  • PV = Present Value (the initial investment amount)
  • FV = Future Value (the ending value of the investment)
  • The 0 represents no periodic payments (such as monthly or quarterly contributions)
  • The negative PV is because it represents an outgoing payment or investment.

For the same example:

  • n = 3
  • PV = 1,000
  • FV = 1,500

In Excel, you would enter:

excelCopyEdit=RATE(3, 0, -1000, 1500)

The result would be 14.47%, which matches the manual calculation.

Conclusion:

Both methods in Excel—using the basic formula or the RATE function—can calculate the CAGR. The first method using the standard formula gives you flexibility, while the second one is useful for more complex financial scenarios.

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