Compound Annual Growth Rate (CAGR) - Revision history

Designing Buildings at 07:22, 10 November 2020

2020-11-10T07:22:51Z

← Older revision		Revision as of 07:22, 10 November 2020
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	* Investopedia - [http://www.investopedia.com/terms/c/cagr.asp CAGR]		* Investopedia - [http://www.investopedia.com/terms/c/cagr.asp CAGR]

−	[[Category:~~Standards_/_measurements~~]] [[Category:~~DCN_Standard~~]] [[Category:Cost_/_business_planning]] [[Category:Property_development]]	+	[[Category:DCN_Definition]] [[Category:DCN_Guidance]] [[Category:Standards_/_measurements]] [[Category:Cost_/_business_planning]] [[Category:Property_development]]

Editor at 13:41, 18 May 2018

2018-05-18T13:41:15Z

← Older revision		Revision as of 13:41, 18 May 2018
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	* Profitability.		* Profitability.
	* Residual value.		* Residual value.
		+	* Turnover.
	* Yield.		* Yield.

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	* Investopedia - [http://www.investopedia.com/terms/c/cagr.asp CAGR]		* Investopedia - [http://www.investopedia.com/terms/c/cagr.asp CAGR]

−	[[Category:Standards_/_measurements]] [[Category:Cost_/_business_planning]] [[Category:Property_development]]	+	[[Category:Standards_/_measurements]] [[Category:DCN_Standard]] [[Category:Cost_/_business_planning]] [[Category:Property_development]]

Editor at 14:52, 27 March 2018

2018-03-27T14:52:14Z

← Older revision		Revision as of 14:52, 27 March 2018
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	* Cost engineering.		* Cost engineering.
	* Cost performance index (CPI).		* Cost performance index (CPI).
		+	* Cost-benefit analysis in construction.
	* Discounting.		* Discounting.
	* Gross value added (GVA).		* Gross value added (GVA).

Editor at 12:13, 27 February 2017

2017-02-27T12:13:36Z

← Older revision		Revision as of 12:13, 27 February 2017
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	* Cash flow.		* Cash flow.
	* Cost engineering.		* Cost engineering.
		+	* Cost performance index (CPI).
	* Discounting.		* Discounting.
	* Gross value added (GVA).		* Gross value added (GVA).

Editor at 12:19, 10 January 2017

2017-01-10T12:19:27Z

← Older revision		Revision as of 12:19, 10 January 2017
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	* Internal rate of return.		* Internal rate of return.
	* Net Present Value.		* Net Present Value.
		+	* Profitability.
	* Residual value.		* Residual value.
	* Yield.		* Yield.

Editor at 11:55, 12 December 2016

2016-12-12T11:55:26Z

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	* Accounting.		* Accounting.
		+	* Base year.
	* Cash flow.		* Cash flow.
	* Cost engineering.		* Cost engineering.

Editor at 15:52, 8 December 2016

2016-12-08T15:52:44Z

← Older revision		Revision as of 15:52, 8 December 2016
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	* Cost engineering.		* Cost engineering.
	* Discounting.		* Discounting.
		+	* Gross value added (GVA).
	* Internal rate of return.		* Internal rate of return.
	* Net Present Value.		* Net Present Value.

Designing Buildings at 07:40, 7 December 2016

2016-12-07T07:40:14Z

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−	~~The compound~~ annual growth rate (CAGR) is a measure of the mean annual growth rate of an investment over ~~different~~ specified time ~~periods~~. It measures the growth rate effecting the value of the initial investment to that of the end-of-period investment, with the assumption that over that time period the investment has been compounding.	+	Compound annual growth rate (CAGR) is a measure of the mean annual growth rate of an investment over a specified time period. It measures the growth rate effecting the value of the initial investment to that of the end-of-period investment, with the assumption that over that time period the investment has been compounding.

−	While CAGR isn’t a true return rate, it is a representational figure used to ~~more easily~~ understand an investment’s returns~~. It~~ is considered ~~to be~~ a better measure of return over time. The effects of compounding are ignored by the average annual return, ~~and so~~ can overestimate an investment’s growth. By contrast, CAGR uses a geometric average to represent the consistent rate at which, if compounding had occurred at the same annual rate, the investment would have grown.	+	While CAGR isn’t a true return rate, it is a representational figure used to understand an investment’s returns and is considered a better measure of return over time. The effects of compounding are ignored by the average annual return figures, which can overestimate an investment’s growth. By contrast, CAGR uses a geometric average to represent the consistent rate at which, if compounding had occurred at the same annual rate, the investment would have grown.

	The formula for CAGR is:		The formula for CAGR is:
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	* n = Number of periods (months, years, etc.)		* n = Number of periods (months, years, etc.)

−	As an example, an investment of £2,000 is made ~~in a fund~~ for six years, with year-end values of the investment ~~being~~ as follows:	+	As an example, if an investment of £2,000 is made for six years, with year-end values of the investment as follows:

	* Year 1: £1,500		* Year 1: £1,500
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	* Year 6: £12,000		* Year 6: £12,000

−	The CAGR ~~of this investment~~ is ~~calculated as follows~~:	+	The CAGR is: (12,000 / 2,000)^(1/6) – 1 = 0.348 = 34.8%

−	~~(12~~,~~000 / 2~~,~~000)^(1/6) – 1 = 0.348 = 34~~.8%	+	As it is a simple metric, CAGR is also flexible and can be used in a variety of ways, for example, comparing investments of different types, or tracking the performance of various measures alongside one another.

−	As it is a simple metric, CAGR is also flexible and can be used in a variety of ways, such as for comparing investments of different types with one another, or for tracking the performance of various measures alongside one another.	+	However, it should be used with other metrics to give a representative overall picture as it does have some limitations. For instance, it ignores volatility and implies that growth over the time period was steady, whereas in reality growth can be higher or lower from one year to the next. In addition, CAGR does not predict that the investment will continue to grow at the same rate, as it is only a historical metric. Many other factors might affect the rate of growth in future years.
−		+
−	However, it should be used ~~alongside~~ other metrics as it does have some limitations. For instance, it ignores volatility and implies that growth over the time period was steady, whereas in reality growth can be higher or lower from one year to the next. ~~As well as this~~, CAGR ~~cannot be safely used to assume~~ the investment will continue to grow at the same rate, as it is only a historical metric. Many other factors might affect the rate of growth in ~~the following~~ years.	+

	= Find out more =		= Find out more =

Editor at 11:46, 6 December 2016

2016-12-06T11:46:34Z

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	where:		where:

−	EV = Investment's end-of-period value	+	* EV = Investment's end-of-period value
−		+	* BV = Investment's beginning value
−	BV = Investment's beginning value n = Number of periods (months, years, etc.)	+	* n = Number of periods (months, years, etc.)

	As an example, an investment of £2,000 is made in a fund for six years, with year-end values of the investment being as follows:		As an example, an investment of £2,000 is made in a fund for six years, with year-end values of the investment being as follows:

Editor at 11:46, 6 December 2016

2016-12-06T11:46:16Z

← Older revision		Revision as of 11:46, 6 December 2016
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	where:		where:

−	EV = Investment's end-of-period value~~<br />~~	+	EV = Investment's end-of-period value
−	BV = Investment's beginning value~~<br />~~	+
−	n = Number of periods (months, years, etc.)	+	BV = Investment's beginning value n = Number of periods (months, years, etc.)

	As an example, an investment of £2,000 is made in a fund for six years, with year-end values of the investment being as follows:		As an example, an investment of £2,000 is made in a fund for six years, with year-end values of the investment being as follows: