Present Value of Perpetuity

Time Value of Money
Updated Apr 2026 • Has calculator

The current worth of a stream of equal payments that continues indefinitely.

What is PV of Perpetuity?

A perpetuity pays a fixed cash flow forever, with no end date. The present value of a perpetuity simplifies to the payment divided by the discount rate — a surprisingly tidy result that falls out of the infinite geometric series when r > 0. Perpetuities are rare in practice (the British government's consols are a classic example), but the formula is widely used as an approximation for very long-duration assets such as preferred stocks, real estate in perpetuity, and the terminal value in discounted cash flow models.

Formula

PVP = PMT ÷ r

Worked Example

Worked example — Bank of America Preferred Stock Series GG (BAC/PG)

2024 — Illustrative Perpetuity Valuation

Step 1  Annual preferred dividend: $1.50 per share
Step 2  Required return on preferred equity: 6.0%
Step 3  PVP = $1.50 ÷ 0.06 = $25.00
Step 4  → At a 6% required return, an indefinite $1.50 annual dividend is worth $25.00 per share

Source: Investopedia — Perpetuity (2024-01-01)

Calculate PV of Perpetuity

Fixed annual payment (e.g., preferred dividend)

Required annual rate of return

Present Value of Perpetuity

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Not investment advice.

How to Interpret PV of Perpetuity

< 0
Zero or Negative — check inputs
> 0
Positive PV — fair value of the perpetuity
Sources
  1. CFA Institute — Fixed Income & Time Value of Money, 7th ed.
  2. Investopedia — Perpetuity