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How to calculate average/compound annual growth rate in Excel?

This article is talking about ways to calculate the Average Annual Growth Rate (AAGR) and Compound Annual Growth Rate (CAGR) in Excel.

Calculate Average annual growth rate in Excel

Calculate compound annual growth rate in Excel

Calculate compound annual growth rate with XIRR function in Excel

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Calculate Compound Annual Growth Rate in Excel

To calculate the Compound Annual Growth Rate in Excel, there is a basic formula shown as: =((End Value/Start Value)^(1/Periods) -1. And we can easily apply this formula as following:

1. Select a blank cell, for example Cell C6, enter the formula =(B11/B2)^(1/(10-1))-1 into it, and press the Enter key. See left screenshot:
Note: In the formula =(B11/B2)^(1/(10-1))-1, B11 is the cell with end value, B2 is the cell with start value, and 10-1 is the period between start value and end value, and you can change them based on your needs.

2. Select the cell you entered the formula just now (in our case select Cell C6), click the Percent Style button  on the Home tab to change the number to percentage format, and then change its decimal places with clicking the Increase Decimal button  or Decrease Decimal button. See screen shot:


Calculate compound annual growth rate with XIRR function in Excel

Actually, the XIRR function can help us calculate the Compound Annual Growth Rate in Excel easily, but it requires you to create a new table with the start value and end value.

1. Create a new table with the start value and end value as the following first screen shot shown:

doc-aagr-cagr-10

Note: In Cell B30 enter =B2, in Cell C30 enter =A2, in Cell B31 enter =-B11, and in Cell C31 enter =A11, or you can enter your original data into this table directly. By the way, you must add a minus before the End Value.

2. Select a blank cell below this table, enter the formula  =XIRR(B30:B31,C30:C31) into it, and press the Enter key.

3. For changing the result to percentage format, select the Cell with this XIRR function, click the Percent Style button  on the Home tab, and then change its decimal places with clicking the Increase Decimal button  or Decrease Decimal button. See screen shot:

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Calculate Average Annual Growth Rate in Excel

To calculate the Average Annual Growth Rate in excel, normally we have to calculate the annual growth rates of every year with the formula = (Ending Value - Beginning Value) / Beginning Value, and then average these annual growth rates. You can do as follows:

1. Besides the original table, enter the formula =(B3-B2)/B2 into the blank Cell C3 and, and then drag the Fill Handle to the Range C3:C11.

2. Select the Range C3:C11, click the Percent Style button  on the Home tab, and then change its decimal places with clicking the Increase Decimal button  or Decrease Decimal button. See above screenshot:

3. Average all annual growth rate with entering the formula =AVERAGE(C3:C11) into Cell C12, and press the Enter key.

Up to now, Average Annual Growth Rate has been calculated and shown in the Cell C12.


Demo: calculate average/compound annual growth rate in Excel

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  • To post as a guest, your comment is unpublished.
    DQ · 3 months ago
    Hi - I'm trying to work backwards to find the highest price I can buy a share at when I have a total expected return. Are you able to please help me by reverse engineering the formula to work this out. Using your example - I'm trying to work out what the "3" should be 2.43443 =(3200/x)^(1/(40-8))-1
  • To post as a guest, your comment is unpublished.
    Robert · 1 years ago
    Hi,

    I have 7 fiscal years of foot traffic data for a retail store:

    FY12 FY13 FY14 FY15 FY16 FY17 FY18
    2653 2848 2871 2925 2685 2923 3000

    My question is: while traffic is increasing, is it increasing at a decreasing rate? Is the growth slowing?


    Your first example "(B11/B2)^(1/(10-1))-1" takes the end value and beginning value to get the CAGR. The part I don't understand is that, what about the values in the middle? How does only taking the end and beginning value determine the growth rate accurately? Is there another method where it takes all the fiscal year values into account?
    • To post as a guest, your comment is unpublished.
      Robert · 1 years ago
      FY12 - 2653
      FY13 - 2848
      FY14 - 2871
      FY15 - 2925
      FY16 - 2685
      FY17 - 2923
      FY18 - 3000
      • To post as a guest, your comment is unpublished.
        Tang Kelly · 1 years ago
        Hi Robert,
        You can use this formula = (Ending Value - Beginning Value) / Beginning Value to calculate the growth rate of each year, and then compare those growth rates one by one.
  • To post as a guest, your comment is unpublished.
    Wayne Hurt · 1 years ago
    Can someone help with this problem using excel?

    The following data show average growth of the human embryo prior to birth.
    EMBRYO AGE IN WEEKS WEIGHT IN GRAMS
    8 3
    12 36
    20 330
    28 1000
    36 2400
    40 3200

    a). Find the quadratic function of “best fit” for this data. Write this function in standard form: f(x) = ax2 + bx + c.
    b). Make a sketch of the scatter plot and the parabola. Plot the quadratic function found above the Y = menu.
    c). According to your model, what would a 32-week embryo weigh?
    d). According to your model, what week would an embryo weigh 3000 grams?
    e). Could the model be used for weight of an embryo for any number of weeks age (such as 100 or 200)? Explain
    • To post as a guest, your comment is unpublished.
      Tang Kelly · 1 years ago
      Hi Wayne,
      You can calculate the Compound Annual Growth Rate with the second method:
      =(3200/3)^(1/(40-8))-1
  • To post as a guest, your comment is unpublished.
    McKing · 1 years ago
    There is a new tool that will fit to your planning software.
    MS Excel is a spreadsheet developed by Microsoft for Windows, macOS, Android and iOS.
    It features calculation, graphing tools, pivot tables, and a macro programming language called Visual Basic for Applications.
    Thus, it can do Bookkeeping/Accounting, Budgeting (Existing Year and Long Term) and Data Analysis.
  • To post as a guest, your comment is unpublished.
    Shailender · 1 years ago
    In the CAGR formula, why we are using -1 at the end.
    I am using two formulaes 1) (I5/I4)^(1/(25-1))-1
    2)(I5/I4)^(1/(25)-1) which one is correct..?
    Please help me out on this thank you.
    • To post as a guest, your comment is unpublished.
      Sergio · 1 years ago
      The first formula you are using is the correct one!