This is a tool that calculates the present value of a perpetuity (perpetual annuity), which can be fixed or growing.

For this calculation, it is necessary to supply the following information:

• The perpetuity payment as an annual (default), semiannual, quarterly, monthly, weekly or daily amount. For a fixed perpetuity, this payment remains constant. For a growing perpetuity, on the other hand, the payment grows each period at the specified growth rate, and thus the entered payment should be that for the first period.
• The perpetuity growth rate, which should only be greater than the default value of 0% if the perpetuity is growing. In this case, since the perpetuity is grown every payment period, the entered growth rate should be consistent with this period. On the tool form, the rate is usually expressed in percentage terms (unless the formatting is explicitly set to express it as a decimal).
• The perpetuity type, which is either ordinary or perpetuity-due. The difference between these types is that for an ordinary perpetuity, the payments are at the end of each period, whereas for a perpetuity-due, the payments are at the beginning of each period.
• The annual interest (discount) rate, which can be entered as either a nominal (default) or effective rate. If it is a nominal annual rate then it is used together with the compounding and payment frequencies to determine the interest rate applied per payment period. An effective annual rate, on the other hand, is a rate that has already factored in the periodic compounding to give a rate equivalent to interest being compounded annually, and thus only needs payment frequency to determine the interest rate applied per payment period. On the tool form, the rate is usually expressed in percentage terms (unless the formatting is explicitly set to express it as a decimal).
• The compounding frequency, which specifies how often interest is compounded per year. The possible values for the compounding frequency are annual (default), semiannual, quarterly, monthly, weekly, daily or continuous. For flexibility, the compounding frequency does not have to be the same as the payment frequency. Note also that the compounding frequency is only important if a nominal annual interest rate is given, since an effective annual rate has already taken the periodic compounding into account.