Perpetuity Calculator

Calculate both standard and growing perpetuities quickly with our simple, fast Perpetuity Calculator. Get accurate results instantly for your financial planning.

Result Present Value $0

Related Calculators: Compound Interest Calculator, Annualized Return Calculator, Appreciation Calculator, Asset Allocation Calculator: Find the Perfect Balance of Risk and Reward, Capital Asset Pricing Model (CAPM) Calculator, Compound Annual Growth Rate (CAGR) Calculator, Cost of Equity Calculator, Economic Value Added (EVA) Calculator, Equivalent Rate (ER) Calculator, Expected Return Calculator, Expected Utility (EU) Calculator, Expense Ratio Calculator, Investment Fee Calculator: See How Fees Impact Your Investment Growth, Free Float (FF) Calculator, Future Value Calculator: How Much Will Your Savings Grow?, Graham Number (GN) Calculator, Internal Rate of Return (IRR) Calculator, Margin Of Safety (MOS) Calculator, Market Value Added (MVA) Calculator, Maturity Value (MV) Calculator, Modified Internal Rate of Return (MIRR) Calculator, Money Factor (MF) Calculator, Net Operating Profit After Tax (NOPAT) Calculator, Net Present Value (NPV) Calculator, Opportunity Cost (OC) Calculator, Optimal Hedge Ratio (OHR) Calculator, Present Value Interest Factor Of Annuity (PVIFOA) Calculator, Present Value Calculator: Your Tool for Financial Forecasting, Profitability Index Calculator, Real Rate of Return Calculator, Return on Investment (ROI) Calculator: Visualize Your Investment Outcomes, Rule of 72 Calculator, Sinking Fund (SF) Calculator, Systematic Investment Plan (SIP) Calculator, Year Over Year Growth (YOYG) Calculator,

Perpetuity Formula

Formula:
PV = C / r

Where:

PV: Present Value of the perpetuity
C: Cash flow per period (constant payment)
r: Discount rate or rate of return

Growing Perpetuity Formula

Formula:
PV = C / (r - g)

Where:

PV: Present Value of the growing perpetuity
C: Initial cash flow per period
r: Discount rate or required rate of return
g: Growth rate of the cash flows

Note: The discount rate (r) must be greater than the growth rate (g) for the formula to be valid.

Perpetuity Meaning

A perpetuity is a financial instrument that provides an infinite series of cash flows or payments, typically occurring at regular intervals. Unlike traditional loans or bonds that have a defined end date, a perpetuity continues indefinitely. This makes it a unique type of investment, often used in academic finance to simplify complex financial calculations.

The most common example of a perpetuity is a bond that pays a fixed interest rate forever, without repaying the principal. The value of a perpetuity is derived from the present value of its expected cash flows, discounted at an appropriate rate. Perpetuities are theoretical constructs, but they are useful in finance for evaluating long-term projects, pensions, or any investment that generates a steady stream of income over an indefinite period.

In real life, true perpetuities are rare, but the concept is widely applied in financial models to estimate the value of assets that produce cash flows for a very long time.