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 formulas

Variables

PVPresent value of the growing annuity (dimensionless)
AThe value of the individual payments in each compounding period (dimensionless)
iThe discount rate, or the interest rate at which the amount will be compounded each period (dimensionless)
gThe growing rate of payments over each time period (dimensionless)
nThe number of periods (dimensionless)