Growing Perpetuity Calculator
Perpetuity value with growing cash flows.
Calculate the present value of a growing perpetuity using the Gordon formula, from the first-year cash flow, growth rate, and discount rate.
What this tool does
This calculator applies the Gordon growing perpetuity formula to estimate the present value of an infinite stream of cash flows that grow at a constant rate each period. It divides your first-year cash flow by the spread between your discount rate and growth rate. The result represents what that perpetual, growing income stream is worth in today's terms. The discount rate—reflecting your required return or cost of capital—and growth rate are the primary drivers of the valuation; small changes in either can significantly shift the outcome. A common scenario involves valuing a mature dividend-paying entity or a long-term lease with annual increases. Note that this model assumes cash flows continue indefinitely at a stable growth rate, which rarely holds in practice. The calculator is for educational illustration and does not account for inflation, tax treatment, or market disruption.
Enter Values
People also use
Investing
Perpetuity Value Calculator
Calculate the present value of a perpetuity — an infinite annual cash flow stream at a chosen discount rate, computed as cash divided by rate.
Investing
Gordon Growth Model Calculator
Calculate Gordon Growth Model fair value for dividend-paying stocks from current dividend, expected dividend growth, and your required return.
Investing
Future Value Calculator
Calculate future value of an investment with optional monthly contributions. See compound growth over years at any rate.
Formula Used
Spotted something off?
Calculations or display — let us know.
Disclaimer
Results are estimates for educational purposes only. They do not constitute financial advice. Consult a qualified professional before making financial decisions.
5,000 first-year cash flow growing 3% annually, 8% discount: PV = 5,000 / (0.08 - 0.03) = 100,000. Formula requires growth below discount rate. Used in Gordon dividend model and DCF terminal values.
Quick example
With first year cash flow of 5,000 and growth rate of 3% (plus discount rate of 8%), the result is 100,000.00. Change any figure and watch the output shift — it's often more useful to see the pattern than to memorise the formula.
Which inputs matter most
You enter First Year Cash Flow, Growth Rate, and Discount Rate. Not every input has equal weight. Adjusting one input at a time toward extreme values shows which ones move the result most.
What's happening under the hood
Gordon growing perpetuity formula. The formula is listed in full below. If the number looks off, you can retrace the calculation by hand — that's the point of showing the working.
Why investors run this
Most people's intuition for compounding is wrong — not because the math is hard, but because linear thinking doesn't account for curves. Running numbers through a calculator like this one is the cheapest way to recalibrate that intuition before making an irreversible decision about contribution rate, asset mix, or retirement age.
What this doesn't capture
Steady-rate math ignores real-world volatility. Actual returns are lumpy; sequence-of-returns risk matters most in drawdown; fees and taxes drag on compound growth; and behaviour changes in drawdowns can reduce outcomes below the projection. The number represents one scenario rather than a forecast.
Where to go next
This calculation rarely sits alone in a planning exercise. If you're running these numbers, you'll probably also want the perpetuity value calculator, the gordon growth model calculator, and the asset growth projection calculator — each one answers a different question in the same territory. Treating them as a set rather than in isolation usually produces a more honest picture.
A perpetuity with £5,000 initial cash flow growing at 3% annually and discounted at 8% has a present value of 100,000.00.
Inputs
This example uses typical values for illustration. Adjust the inputs above to match a specific situation and see how the result changes.
Sources & Methodology
Methodology
The calculator applies the Gordon growth model for perpetuities, which values a stream of cash flows that grow at a constant rate indefinitely. It divides the first-year cash flow by the spread between the discount rate and the growth rate. This computation assumes cash flows begin in year one, grow at a steady percentage each period, and continue forever without interruption. The model treats both rates as constant over time and does not account for fees, taxes, inflation adjustments beyond the growth rate specified, or changes in market conditions. Results are sensitive to the inputs—particularly when the growth rate approaches the discount rate, small changes produce large value swings. The formula is most suitable for mature businesses or assets with predictable, stable growth characteristics.
References
Frequently Asked Questions
Growth must be below discount?
Dividend stock use?
Long-term growth cap?
Terminal value sensitivity?
Related Calculators
Perpetuity Value Calculator
Calculate the present value of a perpetuity — an infinite annual cash flow stream at a chosen discount rate, computed as cash divided by rate.
Gordon Growth Model Calculator
Calculate Gordon Growth Model fair value for dividend-paying stocks from current dividend, expected dividend growth, and your required return.
Future Value Calculator
Calculate future value of an investment with optional monthly contributions. See compound growth over years at any rate.
More Investing Calculators
Investing
100 Minus Age Asset Allocation Calculator
Calculate stock-vs-bond allocation using the 100-minus-age rule of thumb — see the suggested percentage split for any age you put in.
Investing
Active vs Passive Investing Calculator
Compare active and passive investment strategies accounting for fees across long horizons — the wealth gap from a percentage point of fee drag.
Investing
Annuity Present Value Calculator
Calculate the present value of an ordinary annuity from regular payments, periodic rate, and the number of periods until the stream ends.
Investing
APR to APY Calculator
Convert APR to APY for any compounding frequency to see the true effective annual yield — what you actually earn (or pay) on a given quoted rate.
Investing
Art Investment Calculator
Calculate art investment net returns including insurance and carrying costs, given purchase price, current value, and length of holding period.
Investing
Asset Allocation Calculator
Calculate suggested portfolio asset allocation by age and risk tolerance (stocks/bonds/cash). Enter risk tolerance 1-10 to see suggested stock and bond.
Explore Other Financial Tools
Savings
Retirement Income Gap Calculator
Calculate your retirement income gap between desired spending and projected income from pensions, benefits, and portfolio withdrawals combined.
Planning
Will vs Intestacy Calculator
Compare will vs intestacy costs with this calculator. Estimate net savings from creating a will based on estate value and intestacy loss rate.
Digital Nomad & Freelance
Side Hustle Break-Even Calculator
Calculate months to break even on a side hustle: upfront investment divided by expected monthly profit, plus the cumulative profit at year-end.