Cernarus

Perpetuity Growth Model Calculator

This calculator computes present values and terminal values using common perpetuity formulas and a two-stage terminal model. It supports level perpetuities, growing perpetuities (Gordon), single-stage terminal values from next-year free cash flow, and an explicit high-growth stage followed by a perpetual steady-state.

Use the method selector to pick the assumption set that matches your forecast horizon and available inputs. The tool provides closed-form formulas and geometric-series calculations so you can reproduce results in spreadsheets or audit logs.

Updated Nov 22, 2025

Present value of a perpetuity that grows at a constant rate g: PV = C / (r - g). Use when growth is expected to continue indefinitely at a steady rate lower than the discount rate.

Inputs

Advanced inputs

Growing perpetuity inputs

Level perpetuity inputs

Terminal from FCF inputs

Two-stage terminal inputs

Results

Updates as you type

Present value (C / (r - g))

$14,285.71

OutputValueUnit
Present value (C / (r - g))$14,285.71currency
Primary result$14,285.71

Visualization

Methodology

Mathematical core: a growing perpetuity uses present value equals cash flow divided by (r minus g) when the discount rate r exceeds the growth rate g; a level perpetuity uses present value equals cash flow divided by r. Two-stage models discount an explicit high-growth series using a geometric series and then apply a Gordon-style perpetuity at the transition point.

Operational controls and model governance: validate discount and growth rate inputs and run sensitivity checks. Follow risk-management frameworks such as ISO 31000 and NIST guidance for secure handling of financial models and data.

Accuracy caveats: formulas assume constant rates and infinite horizon where specified. Small denominators (r minus g near zero) create unstable results; avoid or document scenarios where r is less than or equal to g. Preserve calculation logs for auditability.

Further resources

Expert Q&A

What should I watch for when choosing r and g?

Ensure the discount rate reflects the appropriate risk and horizon. For growing perpetuities and terminals, require the discount rate to exceed the growth rate; if the two are close the result is highly sensitive and should be stress-tested. Document assumptions and run sensitivity tables.

Can I use negative growth rates?

Yes. The formulas accept negative g values. Negative long-term growth may be realistic for declining industries but check whether a perpetuity assumption remains appropriate.

How do I interpret the two-stage model outputs?

The two-stage model separates value generated during an explicit high-growth period from the continuing value after that period. Use the PV of the explicit stage and the PV of the terminal separately for transparency and reconciliation to underlying forecasts.

What accuracy and governance standards should I follow?

Adopt model risk and data-security practices aligned with ISO 31000 for risk management and relevant NIST guidelines for secure data handling. Maintain versioned input records and calculation logs for audit. For engineering or technical standards consult IEEE where relevant and follow workplace safety record practices per OSHA when handling physical data systems.

Sources & citations