Present value of a growing annuity
Description
Present value of an annuity: An annuity is a series of equal payments or receipts that occur at evenly spaced intervals. Leases and rental payments are examples. The payments or receipts occur at the end of each period for an ordinary annuity while they occur at the beginning of each period for an annuity due. In the case of a growing annuity each cash flow grows by a factor of (1+g). Similar to the formula for an annuity, the present value of a growing annuity (PVGA) uses the same variables with the addition of g as the rate of growth of the annuity (A is the annuity payment in the first period).
Related formulasVariables
| PV | Present value of the growing annuity (dimensionless) |
| A | The value of the individual payments in each compounding period (dimensionless) |
| i | The discount rate, or the interest rate at which the amount will be compounded each period (dimensionless) |
| g | The growing rate of payments over each time period (dimensionless) |
| n | The number of periods (dimensionless) |