Perpetuity

For a level perpetuity whose first payment is one period after the valuation date, present value equals the periodic payment divided by the discount rate per period. This assumes a positive constant rate and a sustainable payment. A perpetuity starting immediately includes the immediate payment separately. A growing perpetuity instead uses next period's payment divided by r − g, requiring r greater than the constant growth rate g. Perpetuity models are useful for valuation but are very sensitive to rate and growth assumptions, particularly when r and g are close.