Compound annual growth rate Definition
Compound annual growth rate (CAGR) is one method of assessing the average growth of a value over time. To calculate CAGR, one must solve the equation:
- E = B(1 + r)T
where E denotes ending value, B denotes beginning value, and T denotes the time passed in years. The value of r that solves the equation is the percentage annual growth rate.
The CAGR formula implicitly takes compound interest into account.