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Growing Perpetuity

Forums › Ask CIMA Tutor Forums › Ask CIMA F2 Tutor Forums › Growing Perpetuity

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  • September 5, 2019 at 11:09 am #545062
    khawarbutt
    Participant
    • Topics: 14
    • Replies: 6
    • ☆

    Hi,
    Just wondering why growth rate is deducted from interest/discount rate while calculating present value of growing perpetuity. Don’t seem to get my head around it. Present Value of a growing perpetuity = P / (i – g)

    September 14, 2019 at 8:02 am #546105
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 7079
    • ☆☆☆☆☆

    Hi,

    This is way beyond what you need to know for the exam, and so I’d not spend time looking at it. If you wish to spend time looking at it further then it comes about due to it being the sum of a geometric progression.

    Thanks

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