A company grew revenue from $180M to $225M over 3 years. What is the approximate annual growth rate (CAGR)?

How to answer

Total growth = $225M / $180M = 1.25, or 25% over 3 years. For CAGR, we need the cube root of 1.25. Use the approximation: for small growth rates, CAGR ≈ total growth % / number of years = 25% / 3 ≈ 8.3%. More precisely, 1.077^3 = 1.077 x 1.077 x 1.077. 1.077^2 ≈ 1.16, x 1.077 ≈ 1.25. So CAGR ≈ 7.7%. In an interview, stating 'approximately 7.5-8% annually' demonstrates solid quantitative intuition. The exact answer is 7.72%.

Key idea: Total growth is 25% over 3 years; approximate the cube root.