If a value grows from 80 to 160 over 4 years, what is the CAGR?

If a value grows from 80 to 160 over 4 years, what is the CAGR?

• A. 18.92% per year
• B. 12%
• C. 28%
• D. 38%

Answer: (A)

CAGR measures the constant yearly growth rate that takes the starting value to the ending value when growth compounds each year. Here the value doubles from 80 to 160 over four years, so the total growth factor is 2 across four years. The annual growth factor is the fourth root of 2, which is about 1.1892. Subtracting 1 gives roughly 0.1892, or 18.92% per year. In other words, growing by about 18.9% each year compounds to double in four years. If you test the other options quickly: 12% per year yields less than a doubling in four years, while 28% or higher would overshoot well beyond 160 after four years, so they don’t fit.

CAGR measures the constant yearly growth rate that takes the starting value to the ending value when growth compounds each year. Here the value doubles from 80 to 160 over four years, so the total growth factor is 2 across four years. The annual growth factor is the fourth root of 2, which is about 1.1892. Subtracting 1 gives roughly 0.1892, or 18.92% per year. In other words, growing by about 18.9% each year compounds to double in four years. If you test the other options quickly: 12% per year yields less than a doubling in four years, while 28% or higher would overshoot well beyond 160 after four years, so they don’t fit.