FRM 30th August Batch

skmittal1979
Posts: 7
Joined: Wed Sep 03, 2014 6:29 am

FRM 30th August Batch

Postby skmittal1979 » Wed Sep 03, 2014 7:03 am

I want to know the CAGR formula and its use.
Shishir

edupristine
Finance Junkie
Posts: 722
Joined: Wed Apr 09, 2014 6:28 am

FRM 30th August Batch

Postby edupristine » Thu Sep 04, 2014 8:46 am

Let's take an example of the yearly sales:-
Y0 = 100
Y1 = 110
Y2 = 121
Y3 = 132
Now if we want to look at compounded growth of sales by 3 years we will calculate CAGR: (Y3/Y0)^1/3 -1 = (132/100)^.33 -1 = 9.59%.
Generally CAGR is helpful in financial models it helps you to take reasonable % of forecasting.


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