A company’s revenue grew from $8.4M to $13.7M over 4 years.

1. The CAGR Formula

The Compound Annual Growth Rate (CAGR) formula is:

$$\text{CAGR} = \left( \frac{\text{Ending Value}}{\text{Beginning Value}} \right)^{\frac{1}{n}} - 1$$

Where:

• Ending Value ($EV$) = $\$13.7\text{M}$
• Beginning Value ($BV$) = $\$8.4\text{M}$
• $n$ = $4\text{ years}$

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2. Step-by-Step Calculation

1. Find the total growth multiple:

   $$\frac{\text{Ending Value}}{\text{Beginning Value}} = \frac{13.7}{8.4} \approx 1.6310$$

2. Annualize the growth rate by raising the multiple to the power of $\frac{1}{n}$ (or $\frac{1}{4} = 0.25$):

   $$(1.6310)^{0.25} \approx 1.1301$$

3. Subtract 1 and convert to a percentage:

   $$\text{CAGR} = 1.1301 - 1 = 0.1301 \text{ or } \mathbf{13.01\%}$$

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3. Projected Revenue for the Next 3 Years

Assuming the annual growth rate remains at $13.01\%$ per year: