If you want to determine the perpetuity's current/present value, you can use our Perpetuity calculator.
The flow of cash that continues forever is known as perpetuity. It's a variant of annuity that lasts for an infinite amount of time. In finance, Perpetuity calculation is used to evaluate the cash flow's current state of a company when redeeming it back at a special price.
Types of Perpetuity Stream
There can be three types of perpetuity streams. Let's have a look at these streams a bit:
Regular: After a certain period, the payment will be given to a company, e.g., monthly, or yearly.
Fixed: in this scenario, a fixed amount of money will be paid every time.
Indefinitely: It's an infinite loop of payment, and it stays continuous without an end.
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Formula of Perpetuity Calculator
To instantly find the present value of perpetuities, you can use our calculator, or to find it manually, you can use the formula listed below:
PV = D / R
PV = present value of perpetuity.
D = dividend
R = discount rate
To know about capital gain yield, you can use our Capital Gain Yield Calculator.
To better understand the perpetuities concepts, let us have an example below:
Suppose a boy invested in a bond returns a dividend of $10 yearly. Now, let's say the discount rate is 5%; find the worth/present value of this perpetuity.
Dividend = $10
Discount rate = 5%
PV = present value of perpetuity = ?
By using the PV of perpetuity formula, we will find the values:
PV = D / R
Putting values in the formula:
PV = $10 / 5%
PV = $200
How to use the Perpetuity Calculator?
The steps to use the perpetuity calculator are as follows:
Step 1: Enter the dividend value in the first required input.
Step 2: Enter the discount rate value in the second required input.
Step 3: The calculator will automatically display an answer on the screen.
To find the perpetuity value, you can use our perpetuity calculator. Just enter the required values, and the answer will be shown on the screen.