Payment =

Interest Rate =

Growth Rate = 0

Present Value =

Calculates the present value of cash flows in perpetuity. There are two alternatives allowed:

- fixed amount every year

- amount changes by fixed percent

- Payment: periodic payment, dividend or coupon amount

- Interest Rate: interest rate expressed as a percentage

- Growth Rate: percentage by which the payment grows (by a fixed amount)

- Present Value: present value of the perpetuity

Description and examples are provided by [http://www.financeformulas.net/Present_Value_of_Growing_Perpetuity.html | financeformulas.net].

Submitted by Pawel Wydymus and William Davis.

What's the present value of a $100 payment made at a 5% interest rate that increases 3% each period?

- Payment: 100

- Interest Rate: 5%

- Growth Rate: 3%

The present value is $5,000.

What's the present value of a $100 payment made at a 3% interest rate with no payment increase?

- Payment: 100

- Interest Rate: 3%

- Growth Rate: 0%

The present value is $3,3333.33.

Payment

Interest Rate

Growth Rate

Present Value

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