Perpetuity Calculator
Results are estimates based on the values you enter. Recheck your inputs and assumptions before using the output for decisions.
Calculate the present value of a level perpetuity from an annual cash flow and a discount rate.
Perpetuity Calculator
Free online perpetuity calculator to estimate the present value of a level perpetual cash flow using an annual cash flow amount and a discount rate. This calculator is useful for finance students, investors, analysts, business owners, valuation learners, and anyone who wants to understand how much a constant annual payment stream is worth today if it continues forever. A perpetuity is a stream of equal cash flows that does not end. In practice, this formula is often used as a simplified model for very long-lasting income streams, terminal value estimates, preferred stock valuation, endowments, trust payouts, and property or business cash flow approximations where the cash flow is assumed to remain stable.
This calculator uses two main inputs. Annual cash flow means the fixed amount received each year forever. Discount rate means the return rate required by the investor or the rate used to convert future cash flows into present value. Once those values are entered, the calculator shows perpetuity value, capitalization multiple, value per $100 annual cash flow, and annual yield on perpetuity value. These outputs help you see not only the present value, but also the valuation multiple implied by the discount rate and the relationship between annual income and the asset value produced by the perpetuity formula.
The formula of perpetuity
Perpetuity value = Annual cash flow / Discount rate
Capitalization multiple = 1 / Discount rate
Value per $100 annual cash flow = 100 / Discount rate
Annual yield on perpetuity value = Annual cash flow / Perpetuity value
Here annual cash flow means the equal payment expected every year, discount rate means the required return expressed as a decimal, perpetuity value means the present value of the never-ending level cash flow stream, capitalization multiple means how many times the annual cash flow investors are willing to pay at the chosen rate, and annual yield on perpetuity value means the annual cash flow as a share of the calculated present value.
Solved Example
Example 1: Find the perpetuity value if annual cash flow is $1,200 and discount rate is 8%.
Solve: Perpetuity value = 1200 / 0.08 = $15,000
Capitalization multiple = 1 / 0.08 = 12.5000
Value per $100 annual cash flow = 100 / 0.08 = $1,250.00
Annual yield on perpetuity value = 1200 / 15000 = 8.00%
Example 2: Find the result if annual cash flow is $2,500 and discount rate is 5%.
Solve: Perpetuity value = 2500 / 0.05 = $50,000
Capitalization multiple = 1 / 0.05 = 20.0000
Value per $100 annual cash flow = 100 / 0.05 = $2,000.00
Annual yield on perpetuity value = 2500 / 50000 = 5.00%
Example 3: Find the result if annual cash flow is $4,000 and discount rate is 10%.
Solve: Perpetuity value = 4000 / 0.10 = $40,000
Capitalization multiple = 1 / 0.10 = 10.0000
Value per $100 annual cash flow = 100 / 0.10 = $1,000.00
Annual yield on perpetuity value = 4000 / 40000 = 10.00%
Table of perpetuity calculator
| Annual Cash Flow | Discount Rate | Perpetuity Value | Capitalization Multiple |
|---|---|---|---|
| $1,000 | 4% | $25,000 | 25.0000 |
| $1,200 | 8% | $15,000 | 12.5000 |
| $2,500 | 5% | $50,000 | 20.0000 |
| $4,000 | 10% | $40,000 | 10.0000 |
How to use this perpetuity calculator
Enter the annual cash flow in the proper input field. After that, enter the discount rate as a percentage value. Then click the calculate button. The calculator will show perpetuity value, capitalization multiple, value per $100 annual cash flow, and annual yield on perpetuity value in the result box.
This calculator is useful when you want a fast valuation of a stable income stream that is assumed to continue indefinitely. A lower discount rate produces a higher present value because future payments are discounted less heavily. A higher discount rate produces a lower present value because investors demand a stronger return. That simple relationship makes perpetuity valuation a useful teaching tool in finance and a practical shortcut in valuation work when a level long-term cash flow is a reasonable assumption.
When using the result, remember that a perpetuity assumes the annual cash flow never changes and never stops. Real businesses, properties, and investments rarely behave with that level of stability forever. Because of that, the perpetuity formula is best treated as a model rather than a perfect forecast. Even so, it is one of the most important valuation formulas in finance because it clearly shows how present value depends on expected cash flow and required return. This calculator gives a fast way to estimate that relationship for valuation review, finance learning, and long-term income analysis.