How to Use Perpetuity Calculator
The Perpetuity Calculator makes it straightforward to value an infinite stream of payments in just a few steps.
- Select Payment Period — Choose Annual or Monthly depending on how often the cash flow is received.
- Enter Cash Flow (C) — Input the fixed payment amount you receive each period in the Perpetuity Calculator.
- Enter Discount Rate (r) — Provide the required rate of return or opportunity cost as a percentage.
- Toggle Growing Perpetuity — If the cash flows grow over time, enable the growing perpetuity option and enter the growth rate (g).
- Read the Result — The Perpetuity Calculator instantly displays the present value (PV).
The Perpetuity Calculator updates in real time as you adjust any input, so you can experiment with different discount rates and growth assumptions.
Formula & Theory — Perpetuity Calculator
The Perpetuity Calculator is built on two core present-value formulas from time-value-of-money theory.
Standard perpetuity:
PV = C / r
Growing perpetuity (Gordon Growth Model):
PV = C / (r − g)
| Symbol | Meaning |
|---|---|
| PV | Present value of the perpetuity |
| C | Cash flow per period |
| r | Discount rate (required rate of return) |
| g | Constant growth rate of cash flows |
The intuition behind the Perpetuity Calculator formula is that as the time horizon extends to infinity, the sum of discounted cash flows converges to C / r (or C / (r − g) when growing), provided r > g.
Assumptions
The Perpetuity Calculator assumes constant periodic cash flows, a fixed discount rate, and — for growing perpetuities — a constant growth rate strictly less than the discount rate.
Use Cases for Perpetuity Calculator
The Perpetuity Calculator is widely used across finance and investment contexts:
- Dividend Discount Model — Value a stock that pays a perpetually stable or growing dividend using the Perpetuity Calculator and the Gordon Growth Model.
- Real Estate Valuation — Estimate the value of a property generating steady rental income indefinitely.
- Pension & Endowment Planning — Calculate how large a fund must be to sustain perpetual annual payouts to beneficiaries.
- Corporate Finance — Use the Perpetuity Calculator as a terminal-value building block in discounted-cash-flow (DCF) analyses.
- Annuity Comparison — Compare the present value of a perpetuity against a finite annuity to decide which structure is more valuable.
Whether you are a student learning finance fundamentals or a professional building a valuation model, the Perpetuity Calculator gives you an instant, accurate present value with no spreadsheet required.