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


accrued interest adjusting entrywip balance sheetdouble bond equivalent calculatordepreciation expense journal entryclosing entries for partnershipdefine acid test ratioreversing journal entryjob costing excel templatehow to estimate salvage valuecost of goods sold per unit formulareceivables turnover calculationprovision for doubtful accountsannuity table pdfexamples of journal entries with narrationexcel spreadsheet for bookkeepingtimesheet formataverage settlement period for trade receivablessales journal accountingwhat is amortization of intangible assetscapital gearing definitionaccrued wages journal entrycash flow balance sheet templatereduced balance depreciationreceivables turnover ratioscalculate mark up percentagegross profit fifobasics of balance sheet analysisfv in excelfair value journal entriesonline tvm calculatorchart of accounts for non profit organizationsdepreciation of fixed assets definitionfifo and lifo in accountinghow to calculate depreciation on fixed assetsthe present value of a perpetuityaccounting treatment of buyback of sharesnet income sales ratiopayback methodadjusting journal entries unearned revenuechart of accounts restaurantcash voucher format in excelfifo vs liforeceipts and payments accounts templatecost volume profit formulasis accounts payable a credit or debitdouble declining balance method depreciationstockholders equity calculatorwhen is the balance in a prepaid expense account reducedsample spreadsheet for small businessfv formulaapr to ear formulapurchase returns and allowancesinsurance paid in advance journal entrymateriality accounting principledaily sales outstanding calculationapplied overhead ratewhat is intangible assets examplesspecific identification inventory methodsalvage value depreciation calculationhow to calculate trade discounttransfer of receivables with recourseaccounting quiz beesales ledger account formatfinancial accounting journal entries examplesexcel payment formularesidual value excelprepaid expense accounts appear ondiscounts on bonds payablecredit sales vs accounts receivablecalculating depreciation straight linebond pricing equationmanufacturing accounting entriesstock holder equity