Perpetuity Calculator

Perpetuity Calculator

This perpetuity calculator shows you how to compute the present value of perpetuity and perpetuity with growth.

Below is a screenshot of the perpetuity calculator:

Perpetuity Calculator Screenshot

 

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Perpetuity in the financial system is a situation where a stream of cash flow payments continues indefinitely or is an annuity that has no end. In valuation analysis, perpetuities are used to find the present value of a company’s future projected cash flow stream and the company’s terminal value. Essentially, a perpetuity is a series of cash flows that keep paying out forever.

Although the total value of a perpetuity is infinite, it has a limited present value. The present value of an infinite stream of cash flow is calculated by adding up the discounted values of each annuity and the decrease of the discounted annuity value in each period until it reaches close to zero. The finite present value of a perpetuity is used by an analyst to determine the exact value of the company if it continues to perform at the same rate.

 

Present value of perpetuity formula

PV = C / R

where:

PV = Present value

C = Amount of continuous cash payment

r = Interest rate or yield

 

Perpetuity with growth formula

PV = C / (r – g)

where:

PV = Present value

C = Amount of continuous cash payment

r = Interest rate or yield

r = Growth Rate

 

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Analyst Certification FMVA® Program

Below is a break down of subject weightings in the FMVA® financial analyst program. As you can see there is a heavy focus on financial modeling, finance, Excel, business valuation, budgeting/forecasting, PowerPoint presentations, accounting and business strategy.

 

Financial Analyst certification curriculum

 

A well rounded financial analyst possesses all of the above skills!

 

Additional Questions & Answers

CFI is the global institution behind the financial modeling and valuation analyst FMVA® Designation. CFI is on a mission to enable anyone to be a great financial analyst and have a great career path. In order to help you advance your career, CFI has compiled many resources to assist you along the path.

In order to become a great financial analyst, here are some more questions and answers for you to discover:

 

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