How this calculator works
Discount each future payment to today and sum the infinite geometric series. The payment entered is the next payment, not the payment just received. Payment growth and discount rates must cover the same interval. A finite positive value requires the discount rate to exceed growth. This idealization assumes the payer can continue indefinitely.
Formula
PV = next payment/(discount rate - growth rate). Next payment = PV x (discount - growth). Discount = growth + next payment/PV.
Worked example
A level $100 yearly payment discounted at 5% is worth $2,000. A $120 next-year payment growing by 2%, discounted at 8%, is also worth $2,000.
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Frequently asked questions
When is the first payment?
One full payment period from the valuation date. An immediate payment must be added separately.
What if growth equals discount?
The infinite series does not converge to a finite positive present value.
Can I use monthly payments?
Yes. Use monthly discount and growth rates for monthly payments.