The formula to calculate the Implied Growth Rate (IGR) is:
\[ IGR = \left( \left( \frac{FV}{PV} \right)^{\frac{1}{N}} - 1 \right) \times 100 \]
Where:
The implied growth rate is a measure of the annual growth rate that is suggested by the present and future values of an investment or project over a specific period of time. It is a useful metric for investors and analysts to estimate the growth of a company’s earnings, revenues, or other financial metrics, assuming a constant rate of growth over the period in question.
Let's say the future value (FV) is $10,000, the present value (PV) is $5,000, and the number of periods (N) is 5 years. Using the formula:
\[ IGR = \left( \left( \frac{10000}{5000} \right)^{\frac{1}{5}} - 1 \right) \times 100 \approx 14.87 \]
So, the implied growth rate (IGR) is approximately 14.87% per year.
