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Growing Annuity Calculator
Calculate the present and future value of a growing annuity with payments that increase at a constant rate. Includes payment schedule and growing perpetuity value.
Annual increase in each payment
Present Value⧉
$851,421.91
Lump sum today equivalent of the growing payment stream
Future Value⧉
$6,481,240.71
PV compounded forward 30 periods
Total Nominal Payments⧉
$2,378,770.79
Sum of all payments without discounting
Time Value of Money⧉
$1,527,348.88
Difference between nominal total and present value
Last Payment⧉
$117,828.28
First payment grown by 3% for 30 periods
Payment Growth⧉
135.7%
Total growth from first to last payment
Growing Perpetuity PV⧉
$1,250,000.00
Present value if payments continued forever
Payment Growth Over Time
Yr 1
$50,000.00
Yr 8
$61,493.69
Yr 16
$77,898.37
Yr 23
$95,805.17
Yr 30
$117,828.28
Payment Schedule
| Period | Payment | PV Factor | PV of Payment | Cumulative PV |
|---|---|---|---|---|
| 1 | $50,000.00 | 0.9346 | $46,728.97 | $46,728.97 |
| 2 | $51,500.00 | 0.8734 | $44,982.09 | $91,711.07 |
| 3 | $53,045.00 | 0.8163 | $43,300.52 | $135,011.59 |
| 4 | $54,636.35 | 0.7629 | $41,681.81 | $176,693.40 |
| 5 | $56,275.44 | 0.7130 | $40,123.61 | $216,817.01 |
| 6 | $57,963.70 | 0.6663 | $38,623.66 | $255,440.67 |
| 7 | $59,702.61 | 0.6227 | $37,179.79 | $292,620.46 |
| 8 | $61,493.69 | 0.5820 | $35,789.89 | $328,410.35 |
| 9 | $63,338.50 | 0.5439 | $34,451.95 | $362,862.30 |
| 10 | $65,238.66 | 0.5083 | $33,164.03 | $396,026.32 |
| 11 | $67,195.82 | 0.4751 | $31,924.25 | $427,950.57 |
| 12 | $69,211.69 | 0.4440 | $30,730.82 | $458,681.39 |
| 13 | $71,288.04 | 0.4150 | $29,582.00 | $488,263.40 |
| 14 | $73,426.69 | 0.3878 | $28,476.13 | $516,739.53 |
| 15 | $75,629.49 | 0.3624 | $27,411.61 | $544,151.14 |
| 28 | $111,064.45 | 0.1504 | $16,704.34 | $819,863.27 |
| 29 | $114,396.38 | 0.1406 | $16,079.88 | $835,943.15 |
| 30 | $117,828.28 | 0.1314 | $15,478.76 | $851,421.91 |
Planning notes, formulas, and examples
About the Growing Annuity Calculator
A growing annuity is a series of periodic payments that increase at a constant rate over a finite number of periods. Unlike a regular annuity where payments stay flat, a growing annuity reflects real-world scenarios like salary increases, rent escalations, or dividend growth. It is the right model whenever the payment stream itself is changing instead of remaining fixed.
The present value tells you the lump sum equivalent today of the entire future payment stream, while the future value shows what those payments compound to at the end. When payments grow indefinitely, it becomes a growing perpetuity — the foundation of the Gordon Growth Model used to value stocks. That makes the calculator relevant both for personal finance questions and for valuation work that extends beyond one contract or lease.
This calculator handles both ordinary (end-of-period) and annuity-due (beginning-of-period) timing, and includes a full payment schedule showing each period's payment, discount factor, and present value contribution. The growing perpetuity value is also shown as a reference for infinite-horizon valuation. The output is most useful when you want to compare a growing stream to a lump sum or determine how much future income is worth in today's dollars.
When This Page Helps
Use this calculator when the cash flow you are valuing grows over time, such as rent escalations, annual raises, tuition increases, or dividend streams. It is the cleanest way to compare a changing payment schedule against a fixed-rate discount rate without flattening the growth away. It also helps when you need to translate a growing stream into a present value that can be compared with a buyout offer, a contract renewal, or another asset with a different payment pattern.
How to Use the Inputs
- Enter the first payment amount in the series.
- Set the payment growth rate (e.g., 3% annual raises).
- Set the discount or required rate of return.
- Enter the number of periods (years).
- Choose whether payments occur at the beginning or end of each period.
- Review PV, FV, total payments, and the detailed schedule.
Formula used
PV = PMT × [1 − ((1+g)/(1+r))^n] / (r − g) (when r ≠ g)
PV = PMT × n / (1+r) (when r = g)
FV = PV × (1+r)^n
Growing Perpetuity PV = PMT / (r − g) (when r > g)Example Calculation
Result: PV ≈ $889,695
A $50,000 first payment growing at 3% per year over 30 years, discounted at 7%, has a present value of about $889,695. The last payment would grow to roughly $118,000.
Tips & Best Practices
- Use CPI inflation as the growth rate to estimate real-dollar salary present value.
- Compare growing annuity PV against a lump-sum buyout offer to see which is worth more.
- A growing perpetuity (Gordon Growth Model) is used to value dividend stocks — PMT is the dividend.
- If the PV of a growing annuity exceeds a deal's cost, the investment creates value.
- Watch the payment schedule — later payments have minimal PV contribution due to heavy discounting.
Why Growth Changes Valuation
A flat annuity assumes every payment is the same. That can materially understate value when the stream grows each year, which is why growing annuities show up in salary analysis, lease escalations, royalty deals, and dividend planning.
The Key Relationship
The spread between discount rate and growth rate drives the result. If the discount rate is only slightly above growth, distant payments remain meaningful and present value rises sharply. If discounting dominates growth, later payments contribute much less.
Practical Caution
Long horizons can make small assumptions about growth look more certain than they really are. Use a conservative growth rate and check sensitivity if the valuation will influence an investment decision or a buyout negotiation.
Sources & Methodology
Last updated:
Methodology
This worksheet uses the standard growing-annuity present-value relationship for a first payment, growth rate, discount rate, and finite number of periods. It also handles the special case where the discount rate and growth rate are effectively equal, applies the annuity-due timing adjustment when payments occur at the beginning of the period, and compounds the resulting present value forward to show the matching future value. The schedule on the page discounts each growing payment separately so users can see which later payments still matter in present-value terms.
It is a finance-math worksheet, not a forecast of real salary growth, rent growth, or dividend growth. The result depends entirely on the growth and discount assumptions entered by the user, and it does not model taxes, changing discount rates, or scenario-specific risk factors.
Sources
- Compound Interest Calculator (Investor.gov / U.S. Securities and Exchange Commission) — Official compounding reference for the time-value-of-money mechanics used in the worksheet.
- Annuities (Investor.gov / U.S. Securities and Exchange Commission) — SEC investor education overview of periodic-payment and annuity structures that this formula extends with a growth assumption.
Frequently Asked Questions
The standard formula has a denominator of (r−g), which would be zero. The calculator uses the special-case formula PV = PMT × n/(1+r) instead.
A growing annuity has a finite number of periods. A growing perpetuity continues forever, and its PV = PMT/(r−g) only exists when r > g, so the horizon changes the valuation method.
Yes. Enter your current salary as the first payment, expected raise rate as growth, and your opportunity cost of capital as the discount rate. That turns a raise schedule into a present-value figure you can compare to another job or offer.
Use your required rate of return, WACC, or opportunity cost. For personal finance, 6-8% is common, but the right answer is the rate that reflects your actual alternative.
Annuity-due payments occur at the start of each period, making each payment worth more in present value terms. PV(due) = PV(ordinary) × (1+r), so the timing shift is small but important.
Yes. A negative growth rate models shrinking payments, which usually reduces present value relative to a flat annuity with the same first payment. The formula still works as long as the discount-rate assumptions remain valid.
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