CAGR Formula Explained With Examples

The complete guide to the CAGR formula — what every variable means, three worked examples, and an interactive growth chart.

📅 Updated 2026-03-14 🕒 5 min read 📋 Free Calculator Included

📚 Understanding the CAGR Formula

The CAGR formula is a mathematical expression of compounded annualised growth. It answers a simple question: if my investment had grown at a perfectly smooth, constant rate, what would that rate have been? Understanding the formula deeply helps you apply it correctly and interpret results accurately.

📋 CAGR Formula — All Forms

Standard FormCAGR = (EV / BV) ^ (1/n) − 1

Expanded FormCAGR = (Ending Value / Beginning Value) ^ (1 / Number of Years) − 1

Percentage FormCAGR% = [(EV / BV) ^ (1/n) − 1] × 100

Variables Explained

EV (Ending Value): The final value of your investment at the end of the measurement period
BV (Beginning Value): The initial investment amount or value at the start
n (Number of Years): The length of the investment period in years (can be fractional, e.g., 2.5 for 30 months)
^ (Exponent): Raise to the power of — this is the mathematical key to annualising

Why the (1/n) Exponent?

The (1/n) exponent is the mathematical inverse of compounding. When you compound at rate r for n years, you multiply by (1+r)^n. To reverse-engineer the annual rate from the total growth, you take the nth root — which is the same as raising to the power 1/n. This is the geometric mean of the growth factors.

📈 ₹1,00,000 Growth at Different CAGR Rates (10 Years)

🧪 Three CAGR Calculation Examples

🌟 Example 1 — Mutual Fund

SBI Bluechip Fund: NAV of ₹28.50 in Jan 2015 → ₹70.20 in Jan 2025 (10 years)

CAGR = (70.20/28.50)^(1/10) − 1 = 2.4632^0.1 − 1 = 1.0942 − 1 = 9.42%

🌟 Example 2 — Business Revenue

A startup's annual revenue: ₹50 lakh in FY2020 → ₹3.2 crore in FY2025 (5 years)

CAGR = (320/50)^(1/5) − 1 = 6.4^0.2 − 1 = 1.4536 − 1 = 45.36%

🌟 Example 3 — Fractional Years (30 months)

Investment: ₹2,00,000 → ₹2,80,000 in 30 months (n = 30/12 = 2.5 years)

CAGR = (280000/200000)^(1/2.5) − 1 = 1.4^0.4 − 1 = 1.1447 − 1 = 14.47%

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Use the CAGR Calculator

Skip the manual calculation — use the free CAGR calculator for instant, accurate results with full breakdown.

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❓ Frequently Asked Questions

How do I calculate CAGR in Excel?

Use: =((End_Value/Start_Value)^(1/Years))-1. For example: =((C2/B2)^(1/A2))-1 where A2=years, B2=start value, C2=end value. Format the cell as percentage.

What does a negative CAGR mean?

A negative CAGR means the investment lost value over the period. For example, if ₹1 lakh fell to ₹60,000 over 5 years, CAGR = (60000/100000)^0.2 − 1 = −9.53% per year.

Can I use CAGR for monthly data?

Yes. Convert n to a fraction of years. For 18 months of data, use n = 1.5. For 6 months, use n = 0.5. The result will be the annualised rate.

🔗 Related Guides

🔗 Related Calculators

📈CAGR Calculator 💰Investment Return 💹Compound Interest ⚡Rule of 72

💡 Tip: The ^ symbol means "to the power of". On most calculators, use the y^x or x^y button for CAGR calculations.