Ordinary annuities whose payments or receipts are continue forever is called perpetuity. Formula for present value of perptutiy is describe below:

present value of perpetuity formula

 

Example 1:

Mr. Karim wishes to find out investments which return Rs. 10,000 forever, discounted at 10 percent?

present value of perpetuity formula

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References

Financial Management: Theory and Practice, Dr Eugene F Brigham & C Micheal Ehrhardt

Fundamentals of Financial Management: Concise Edition, Brigham Houston

The Economist Guide to Financial Management, John Tennet

Financial Management: Core Concepts, Raymond M Brooks

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