Example of Compound Annual Growth Rate (CAGR)
Let’s take an investment example for Company X,
Beginning Value (Initial Investment) = ₹5,000, Ending Value (Value after 3 years) = ₹7,500, The period is 3 years. The formula for calculating CAGR is,
[Tex]CAGR=\frac{Beginning~Value}{Ending~Value}^{(\frac{1}{Number~of~Years})}-1 [/Tex]
[Tex]CAGR=\frac{5,000}{7,500}^{(\frac{1}{3})}-1 [/Tex]
CAGR = -0.793
Consequently, the CAGR computed for this particular example is roughly -79.3%. A decline in value is indicated by the negative sign throughout the three-year duration. Negative compound annual growth rates (CAGRs) indicate a decrease in the investment.