Calculate the present and future value of a growing annuity with payments that increase at a constant rate. Includes payment schedule and growing perpetuity value.
A growing annuity is a series of periodic payments that increase at a constant rate over a finite number of periods. Unlike a regular annuity where payments stay flat, a growing annuity reflects real-world scenarios like salary increases, rent escalations, or dividend growth. It is the right model whenever the payment stream itself is changing instead of remaining fixed.
The present value tells you the lump sum equivalent today of the entire future payment stream, while the future value shows what those payments compound to at the end. When payments grow indefinitely, it becomes a growing perpetuity — the foundation of the Gordon Growth Model used to value stocks. That makes the calculator relevant both for personal finance questions and for valuation work that extends beyond one contract or lease.
This calculator handles both ordinary (end-of-period) and annuity-due (beginning-of-period) timing, and includes a full payment schedule showing each period's payment, discount factor, and present value contribution. The growing perpetuity value is also shown as a reference for infinite-horizon valuation. The output is most useful when you want to compare a growing stream to a lump sum or determine how much future income is worth in today's dollars.
Use this calculator when the cash flow you are valuing grows over time, such as rent escalations, annual raises, tuition increases, or dividend streams. It is the cleanest way to compare a changing payment schedule against a fixed-rate discount rate without flattening the growth away. It also helps when you need to translate a growing stream into a present value that can be compared with a buyout offer, a contract renewal, or another asset with a different payment pattern.
PV = PMT × [1 − ((1+g)/(1+r))^n] / (r − g) (when r ≠ g) PV = PMT × n / (1+r) (when r = g) FV = PV × (1+r)^n Growing Perpetuity PV = PMT / (r − g) (when r > g)
Result: PV ≈ $889,695
A $50,000 first payment growing at 3% per year over 30 years, discounted at 7%, has a present value of about $889,695. The last payment would grow to roughly $118,000.
A flat annuity assumes every payment is the same. That can materially understate value when the stream grows each year, which is why growing annuities show up in salary analysis, lease escalations, royalty deals, and dividend planning.
The spread between discount rate and growth rate drives the result. If the discount rate is only slightly above growth, distant payments remain meaningful and present value rises sharply. If discounting dominates growth, later payments contribute much less.
Long horizons can make small assumptions about growth look more certain than they really are. Use a conservative growth rate and check sensitivity if the valuation will influence an investment decision or a buyout negotiation.
The standard formula has a denominator of (r−g), which would be zero. The calculator uses the special-case formula PV = PMT × n/(1+r) instead.
A growing annuity has a finite number of periods. A growing perpetuity continues forever, and its PV = PMT/(r−g) only exists when r > g, so the horizon changes the valuation method.
Yes. Enter your current salary as the first payment, expected raise rate as growth, and your opportunity cost of capital as the discount rate. That turns a raise schedule into a present-value figure you can compare to another job or offer.
Use your required rate of return, WACC, or opportunity cost. For personal finance, 6-8% is common, but the right answer is the rate that reflects your actual alternative.
Annuity-due payments occur at the start of each period, making each payment worth more in present value terms. PV(due) = PV(ordinary) × (1+r), so the timing shift is small but important.
Yes. A negative growth rate models shrinking payments, which usually reduces present value relative to a flat annuity with the same first payment. The formula still works as long as the discount-rate assumptions remain valid.