Growing Perpetuity
A growing perpetuity is an infinite stream of cash flows that grow at a constant rate and that are evenly spaced in time.
E.g., Dividend streams
PV of Growing Perpetuity =
Again, this formula assumes that the first cash flow occurs at t=1.
Also, g must be less than R.
Simple Example
How much do you have to save today to withdraw $100 at the end of this year, $102.5 after the next year,
$105.06 the year after, and so on forever, if you earn 5% per annum?
The timeline is as follows:
PV = = $4000
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