Moneyzine
/Investment Guides /Perpetuity and Growing Perpetuity Calculator

Perpetuity and Growing Perpetuity Calculator

Moneyzine Editor
Author: 
Moneyzine Editor
2 mins
October 4th, 2023
Advertiser Disclosure

This calculator provides the user with the present value of a perpetuity, or growing perpetuity. The calculator only requires four inputs: the present value type, cash flow amount, discount rate, and expected growth rate. Using this information, the calculator provides the present value of the cash flow.

Calculator Definitions

The variables used in our online calculator are defined in detail below, including how to interpret the results.

Present Value Type

Using the drop down box, the user can select one of two cash flow types: A Growing Perpetuity is one that has a cash flow that grows over time and continues "forever." A Perpetuity is defined as an annuity without end, or a cash flow that continues indefinitely.

Dollar Amount of Cash Flow ($)

This is the stream of cash derived from an investment, such as an annuity, that continues forever. It is the starting value of the cash flow in the case of a growing perpetuity.

Discount Rate (%)

This is the rate at which future cash flows are discounted to a present value. For example, if you want to discount the future value by 10% each time period, then the discount rate is 10%. As the Discount Rate approaches zero, the Present Value of Cash Flow becomes infinitely large. That is to say, the perpetual stream of money received in the future is not significantly reduced. Therefore, it is more valuable as the discount rate decreases.

Expected Growth Rate (%)

This is the rate at which future cash flows are expected to grow each year. For example, a $1,000 cash flow in year 1, with an Expected Growth Rate of 10%, would provide a cash flow of $1,100 in year 2. This value is only used if the Present Value Type selected is Growing Perpetuity. The value in this cell is ignored in the Perpetuity calculation.

Present Value of Cash Flow ($)

This is the present value of the investment, which takes into consideration the time value of money. This value discounts the Dollar Amount of Cash Flow by the Discount Rate (interest rate) specified.


Perpetuity and Growing Perpetuity Calculator


Disclaimer: These online calculators are made available and meant to be used as a screening tool for the investor. The accuracy of these calculations is not guaranteed nor is its applicability to your individual circumstances. You should always obtain personal advice from qualified professionals.

Related Content

  • What Can Help You Meet Your Budget While Shopping for Important Items?
    Budgeting while ensuring you don't compromise on quality can seem daunting. Whether filling your pantry, updating your wardrobe, or keeping up with the latest tech, smart shopping strategies are crucial for keeping your finances in check.
    April 2nd, 2024
  • How to Make a Million Dollars in 10 Years
    Truthfully, this title should actually be “How to Make a Million Dollars in 10 Years Without Going Into Debt", but that is just getting a little too winded for my liking. It’s true though!
    November 18th, 2024
  • How to Apply Maslow’s Hierarchy to Your Money This Year
    You might vaguely remember your psychology teacher talking about Maslow. He pointed at a picture of a triangle as you nodded off in the back of the school room.
    November 18th, 2024
  • How to Tackle Multiple Savings Goals
    When there’s only so much money to go around, there are often multiple savings goals competing for your money. Think of the young professional who’d like to get a more reliable car, buy a house, and save for retirement. Or consider the young family that’s saving for college, retirement, and a bigger house.
    March 22nd, 2024
  • The Countdown to Early Retirement: 10 Expenses to Eliminate
    Dreaming of waving goodbye to the daily grind five years ahead of schedule? The road to early retirement is paved with more than good intentions; it requires a meticulously crafted strategy with surprising twists. It's not solely about what you should be doing—like diligently saving a portion of your income or investing wisely—but also about what you need to stop doing.
    March 22nd, 2024

Contributors

Moneyzine Editor
The Moneyzine editorial team consists of writers and content specialists with diverse backgrounds.
Moneyzine 2024. All Rights Reserved.