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CAGR formula in Excel

Revenue for each product line was B at the end of the first year in G1 and C at the end of the last year in G2. In D2:D6, work out the compound annual growth rate: the steady yearly growth that turns B into C over those years.

CAGR is (end / start) ^ (1 / years) − 1. The number of years is the last year minus the first: from 2021 to 2025 is 4 years of growth, not 5. Lock the year cells with $ so the formula fills down, and put 1/years in brackets: ^ is worked out before /.

35 Growth per year (CAGR) CAGR with ^ Advanced

revenue.xlsx
Ready

Click a cell while typing to insert it, drag to select a range, F4 adds $, Esc cancels.

Tap a cell while writing a formula to insert it, or slide across cells for a range. The strip above the keyboard has = ( ) : , $.

The CAGR with ^ guide

CAGR, the compound annual growth rate, is the steady yearly growth that turns the start value into the end value: =(C2/B2)^(1/years)-1. From 2021 to 2025 is 4 years of growth. =RRI(years, start, end) gives the same number.

AdvancedAbout 3 minutesBy Updated

The formula

=(end / start) ^ (1 / years) - 1. End divided by start is the growth factor over the whole period. Raising it to 1/years takes the yearly root of it, and subtracting 1 turns a factor like 1.10 into a rate, 10%. Format the cell as a percent.

Count the years between, not the years listed

Revenue at the end of 2021 and at the end of 2025 is four years of growth: 2022, 2023, 2024 and 2025. Five year labels, four steps. Work it out from the cells, $G$2-$G$1, rather than typing 4, so the rate updates when the period changes.

Brackets, because ^ comes first

Excel works out ^ before /. =(C2/B2)^1/4-1 raises to the power 1 and then divides by 4. =C2/B2^(1/4)-1 raises only B2. Wrap both parts: (C2/B2)^(1/4). See percent change for the one-year version.

Why not the average growth?

Total growth of 40% over four years isn't 10% a year: 10% a year compounds to 46%. Dividing the total by the years overstates the yearly rate. CAGR is the rate that, compounded, lands exactly on the end value.

RRI and POWER

=RRI(4, B2, C2) returns the same rate in one function. =POWER(C2/B2, 1/4)-1 is the formula with POWER instead of ^.

FAQ

How do I calculate CAGR in Excel?
Use =(end/start)^(1/years)-1, for example =(C2/B2)^(1/4)-1 for four years of growth, and format the result as a percent. =RRI(4,B2,C2) gives the same answer.
How many years do I use in CAGR?
The number of years between the first and last value: the last year minus the first. From 2021 to 2025 that is 4.
What is the difference between CAGR and average growth?
Average growth splits the total change evenly and ignores compounding. CAGR is the steady rate that compounds to the actual end value, so it is lower when there is growth.
Can CAGR be negative?
Yes. If the end value is lower than the start, CAGR is negative: the steady yearly fall that leads there.

This task is in the timed finance practice test. What Excel interview tests check

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  33. 33Advanced, 3 min INDEX and MATCH togetherINDEX + MATCH
  34. 34Advanced, 3 min Lock just the row or the columnMixed references
  35. 35Advanced, 3 min Growth per year (CAGR)CAGR with ^
  36. 36Core, 3 min Use a rate from another sheetReferences to other sheets
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