Indexation question: How calculate the index growth if we have year 1 and year 4 figures?

Costs in Year 1 = $100
Costs in Year 4 = $130
What is the yearly growth rate.
So that if I was to multiply Year by "X", and then that result by "X", until year 4 it would give me an answer of $30 dollars.  

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Ingeborg Hawighorst (Microsoft MVP / EE MVE)Connect With a Mentor Microsoft MVP ExcelCommented:

you cannot determine a reliable figure for growth rate from just two data points. You can calculate the average growth rate for each year between year 1 and year 4, something like


but that is based on a very slim date source.

Can you step back a bit and explain what you want to achieve?
jppintoConnect With a Mentor Commented:
This should be the formula:

=((End Value/Start Value)^(1/(Periods - 1)) -1

I've attached a simple example file.


About 9.1%. It's the cube root of 30%.
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My formula is based on a "Constant Annual Growth Rate"...
Arno KosterConnect With a Mentor Commented:
if the yearly growth rate is linear, such as :

year 1 : [start]
year 2 : [start] * (1+[growth])
year 3 : [start] * (1+[growth])^2
year 4 : [start] * (1+[growth])^3 = [end]

you can use the solver to solve this.

cell A1 : start value
cell A2 : growth value

cell B1 : formula =A1 (this is the value for year 1)
cell B2 : formula =A1*(1+A2) (this is the value for year 2)
cell B3 : formula =A1*(1+A2)^2 (this is the value for year 3)
cell B4 : formula =A1*(1+A2)^3 (this is the value for year 4)

then use the solver as in

menu data - analysis - solver
target cell = B4
by changing cell A2

starting at 100 & ending at 130 : growth rate = 9,13935128252419 % = 0,0913935128252419

Rory ArchibaldConnect With a Mentor Commented:
Assuming 1 and 4 in A1 and A2 and 100 and 130 in B1:B2 then
Actually, this sounds more like a high school homework question than something that would be needed in real life.

Especially since, even here in Africa, everyone learns how to do that in high school.
Ingeborg Hawighorst (Microsoft MVP / EE MVE)Microsoft MVP ExcelCommented:
Given easycapital's question history, I very much doubt that this is homework.
easycapitalAuthor Commented:
Very interesting approaches.
Thank you teylyn for the support.
Storm Seed, you came really close to getting all the points :)
On a serious note, this was to calculate manufacturing indexation.
Thank you.
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