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Vlad

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Is there a trick to quickly estimate the average annual growth percentage / to or total compounded growth, without a calculator? i.e. X will grow with 5% for the coming 10 years.

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Hi,

You can use the rule of 72.

For example, if you know the revenue will grow from 100M to 400M in 12 years and you need to know the CAGR:

  1. 100M will double and grow to 200M in 6 years
  2. CAGR = 72 / 6 / 100 = 12%
  3. Note that you can take 70-72 depending on what is easier to calculate

Best

Hi,

You can use the rule of 72.

For example, if you know the revenue will grow from 100M to 400M in 12 years and you need to know the CAGR:

  1. 100M will double and grow to 200M in 6 years
  2. CAGR = 72 / 6 / 100 = 12%
  3. Note that you can take 70-72 depending on what is easier to calculate

Best

great thank you! And if you would want to turn it around? For example a 100 million company is expected to grow for 5% per year for the coming 7 years? — Sam on Apr 03, 2018 (edited)

Sure, you need to re-build the formula: CAGR in percent = 72 / years to double, so that is years to double = 72 / CAGR in percent. Now you calculate growth rate over considered period = considered period / years to double. In your example this would be years to double = 72 / 5 = 14.4, growth rate over considered period = 7 / 14.4 = 0.49. Please remember that these are rules of thumb and the bigger the percentages and the considered period get the bigger the error will be. In your example the correct answer would be 1.05^10 -1 = 0.41. — Anonymous on Dec 01, 2019

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The “rule of 72” will help you know when, given an average yearly return, the principal will double (72 / avg yearly return = # of years to double principal). However, to have a precise

answer the calculation will be required.

Hope this helps,

Andrea

The “rule of 72” will help you know when, given an average yearly return, the principal will double (72 / avg yearly return = # of years to double principal). However, to have a precise

answer the calculation will be required.

Hope this helps,

Andrea

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