Present Value of a Growing Annuity Due Formula

Formula

PV = Pmt x (1 + i) x (1 - (1 + g)n x (1 + i)-n ) / (i - g)
Variables used in the annuity formula
PV = Present Value
Pmt = Periodic payment
i = Discount rate
g = Growth rate
n = Number of periods

Use

The present value of a growing annuity due formula shows the value today of series of periodic payments which are growing or declining at a constant rate (g) each period. The payments are made at the start of each period for n periods, and a discount rate i is applied.

A growing annuity due is sometimes referred to as an increasing annuity due or graduated annuity due.

The formula discounts the value of each payment back to its value at the start of period 1 (present value). When using the formula, the discount rate (i) should be greater than the growth rate (g).

Present Value of a Growing Annuity Due Formula Example

If a payment of 8,000 is received at the start of period 1 and grows at a rate of 3% for each subsequent period for a total of 10 periods, and the discount rate is 6%, then the value of the payments today is given by the present value of a growing annuity due formula as follows:

PV = Pmt x (1 + i) x (1 - (1 + g)n x (1 + i)-n ) / (i - g)
PV = 8,000 x (1 + 6%) x (1 - (1 + 3%)10 x (1 + 6%)-10 ) / (6% - 3%)
PV = 70,543.46

The present value of a growing annuity due formula is one of many annuity formulas used in time value of money calculations, discover another at the link below.

Present Value of a Growing Annuity Due Formula November 6th, 2016Team

You May Also Like


Related pages


bookkeeping tutorialsclosing entries for inventoryaged receivables reportledger entries examplesexplain double entry bookkeepingcash dividends declaredexcel amortization spreadsheetexcel calculate irrcontra account journal entrydeferred taxation definitioncalculating markup percentage formulaformula rocecash profit ratio formulanon profit organization chart templatedeferred revenue journal entriespetty cash sign out sheethow to calculate profit ratiocontribution margin percentage calculatorwhat is the formula for markupaccounts payable spreadsheetpractice adjusting entriesmargin and markup formulahow to calculate pmt in excelliquidity acid testadvance salary paid journal entrydefinition of bounced checkendowment fund accountingbasic accounting worksheetaccounting period costswhat is npv in accountingstandard general ledger chart of accountsexample of adjusting journal entriesquick ratio accounting formulaprocess costing equivalent unitspresent value perpetuity calculatoramortization expense income statementwhat is a perpetual inventory system accountinginterest rate excel formulachange from fifo to lifohow do i calculate stockholders equityearning statement templatesalvage value formulahow to journalize notes payabledebit accounts receivable creditpv annuity due tabledeferred inventory methodaccounting for stockholders equityan nsf check is asource document accounting definitiont accounts excel templatepv table annuityaccounting equation for dummiesdoubtful debtpetty cash voucher formwhat is factoring in accountingworksheet template exceljournal entry for prepaid insurancehow to calculate direct materials purchasedis accounts receivable an intangible assetaccounting for partnership dissolutionhow to calculate roce from balance sheetreconciliation template excelbook keeping spreadsheetpv growing perpetuityexcel formula future valueaging of accounts receivableformat of adjusted cash bookmeaning of accrued expensespre operating expenses accounting treatmentcash payment voucher templatedays sales receivables formula