What is CAGR – Whenever an investor invests his money in a company, he definitely thinks in which company we invest our money so that we can get maximum profit. Now here comes the matter in which company we invest our money, here we look at the CAGR of the company so that we can know which company has given a return to the investor, how many% CAGR annually. So we will give you answers to all the questions related to CAGR that you want to know in this article.
What is CAGR?
CAGR is a method of compounding compound annually. Which people use to get the interest found on the interest. Any company growth is taken out on its annual CAGR only by how much% CAGR has the company grown.
CAGR stands for Compounding Interest, which is compound interest, which we call interest over interest in common parlance. And this interest over interest is called compound interest.
CAGR Full Form
CAGR Full Form :- Compounded Annual Growth Rate
Full form of CAGR
Full form of CAGR :- Compounded Annual Growth Rate
How to Calculate CAGR?
In order to calculate the CAGR of any company, interest has to be applied on the interest. Let us give you an example to explain how it works.
For example, suppose you have invested 1000 rupees for 1 year in a company and the CAGR rate of that company is 12% per annum.
So after one year from today you will get 12% interest on 1000 rupees out of that. That is, you will get Rs 120 interest and you will get Rs 1120.
Now you again save that 1120 rupees for the next year at the rate of 12%, then you will now get interest on 1120 rupees. That is, next year you will get 1254 rupees, in which you will get an interest of 134 rupees. The 14 rupees more received in this interest is the interest received on the interest of 120 rupees received in the first year. And it is the interest received on the interest, so it is called Compounded Return. Also known as CAGR.
For any investment option we can find its CAGR with the help of the formula given below:
Where FV means Final Value means the amount you have received at the end of the investment, SV means the starting value means the amount you have invested. And Year means the number of years you have invested.
Cagr Calculator Example
If you have an initial investment of Rs. 1 Lakh in a business, it constitutes the PV. If the total investment has swollen to Rs 10 Lakh (FV) after 5 years (N), the CAGR is:
(10,00,000/1,00,000)1 / 5 – 1 or 0.589
Thus, the CAGR percentage is CAGR x 100 or 58.9%.
How to Calculate CAGR in Excel
You can calculate CAGR in Excel using the RATE function: CAGR = RATE(Years,,-PV,FV).
The RATE, PV, FV and NPER functions in Excel can be used to calculate each of the four variables associated with the CAGR formula. This is demonstrated in the CAGR_1 tab within the Excel file and the formulas below.
CAGR = RATE(Years,,-PV,FV)
PV = PV(CAGR,Years,,-FV)
FV = FV(CAGR,Years,-PV)
Years = NPER(CAGR,,-PV,FV)
How to use CAGR calculator Online?
You can use CAGR calculator online without any charges. Follow these simple steps.
- Enter your initial investment amount.
- Enter the expected value of the investment after a certain period of time.
- Enter the number of years or months for which you wish to use the CAGR calculator online.
The CAGR calculator will generate the results within seconds as soon as you input the values.
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