Perpetuity Calculator Online

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Perpetuity Calculator

Perpetuity Calculator

The fact that the fixed payments that you will receive have a constantly decreasing present value allows us to calculate perpetuity. The present value of a perpetuity is equal to the regular payment divided by the discount rate .

Formula us,

PV = D / R

Let us consider,

  • PV is the present value of perpetuity – how much the perpetuity is worth,
  • D is the dividend or regular payment – the amount of cash flow received every period,
  • R is the discount rate – a percentage amount that represents the time value of money concept. It lowers the value of the future cash flows.
Perpetuity formula – an example

In this example, you will see how to calculate perpetuity step by step. You are offered a bond that pays a $20 dividend yearly and carries on indefinitely. Assuming a 5% discount rate.

PV = $20 / 5%

The answer is PV = $400.

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