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Growing Perpetuity Value Calculator

Work out growing perpetuity value instantly with clear inputs, formula shown and shareable results.

About Growing Perpetuity Value Calculator

A growing perpetuity pays for ever with each payment a fixed percentage above the last. Its value is next year's payment divided by the spread between the discount rate and the growth rate — the engine behind the Gordon dividend growth model.

Formula

Gordon growth

PV = D₁ / (r - g)

D1
Next payment
r
Discount rate
g
Growth rate

Worked example

With the default values below, Growing Perpetuity Value Calculator returns Present Value Of Perpetuity of $83,333.33. Change any input above and every figure here is recalculated in your browser.

Inputs used

Next Year's Paymentminimum 0
5,000
Discount Rateaccepts 0–100 %
9 %
Perpetual Growth Rateaccepts 0–100 %
3 %

Results

Present Value Of Perpetuity
$83,333.33
Discount Rate Minus Growth
6.000%
Initial Yield On Value
6.000%
Validity Check
Valid: growth is below the discount rate

Step by step

  1. 1Values used
  2. 2Gordon growth
  3. 3Present Value Of Perpetuity= 83,333.33
  4. 4Discount Rate Minus Growth= 6.000
  5. 5Initial Yield On Value= 6.000
  6. 6Validity Check= Valid: growth is below the discount rate

Assumptions and limits

  • The result is derived only from the 3 inputs listed above. Anything not among them is not part of the calculation.
  • In particular, this calculator does not take inflation, tax, fees or charges or compounding frequency into account.
  • Figures are rounded for display to 3 decimal places, so totals built from several rounded parts can differ slightly from the unrounded arithmetic.

How these calculators are built and tested is described on the Methodology page. If a figure looks wrong, please report it.

Frequently Asked Questions

Why must growth be below the discount rate?

If g ≥ r the discounted payments no longer shrink, so the sum diverges and no finite value exists.

Why is the answer so sensitive?

The value depends on a small difference of two large numbers, so shaving 1 point off the spread can lift the value by half.

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