Growing perpetuity value: Why Growing Perpetuity Values Are Sensitive
The gap between the discount rate and growth rate drives a growing perpetuity's value. Small changes in either assumption can produce a large change in the estimate.
Use the Growing perpetuity value Calculator to enter your own figures and compare the result with the worked example below.
Growing perpetuity value formula
PV = Next-period cash flow ÷ (r − g)
Worked example
| Item | Example value |
|---|---|
| Next-period cash flow | 100 USD |
| Discount rate | 8 % |
| Growth rate | 3 % |
| Growing perpetuity value | 2,000 USD |
These are illustrative inputs, not current prices, rates or recommended targets. Where a currency is shown, keep all comparable money amounts in the same currency; conversion examples identify the two sides separately.
How to interpret the result
Use the next-period cash flow, not the payment just received. The model requires the discount rate to exceed perpetual growth.
Related calculations
Method and further reading
The example follows the FinMathly calculator method. For broader background, see Investor.gov: Introduction to investing. The background resource may use jurisdiction-specific terms; it does not replace the assumptions of this calculator.
Featured photograph: Pexels.