Present Value of Perpetuity Formula

Present Value of Perpetuity (PV) = Dividend or Regular Payment ÷ Annual Interest Rate or Discount Rate

Dividend or Regular Payment Formula

Dividend or Regular Payment (D) = Present Value of Perpetuity (PV) × Annual Interest Rate or Discount Rate

Annual Interest Rate or Discount Rate Formula

Annual Interest Rate or Discount Rate (R) = Dividend or Regular Payment ÷ Present Value of Perpetuity (PV)

Example

Annual Income of $2000 that will continue indefinitely. This income is expected to grow at 5% per year and the required return used for the discount rate is 10%.

The equation for this example of the present value of a growing perpetuity formula would be Example of PV of Growing Perpetuity,

which would return a present value of $20,000.