Growing Perpetuity

This topic has 1 reply, 2 voices, and was last updated 6 years ago by P2-D2.

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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: 7235
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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