Growing Annuity Calculator

How it is calculated

The tool values a series of payments that rise by a fixed percentage each year. With r = discount rate and g = growth rate (both as decimals, so 7% is 0.07): PV = payment ÷ (r − g) × (1 − ((1 + g) ÷ (1 + r))n). Payment is the first payment in dollars, received one year from now; each later payment is the previous one times (1 + g). n is the number of years and must be a whole number above zero. If r equals g the formula would divide by zero, so the tool switches to PV = payment × n ÷ (1 + r). Growth above the discount rate is allowed and simply gives a larger value. A growth rate of 0 gives an ordinary annuity. Both rates must be above −100%, and a fractional or zero number of years gives no result.

Common mistakes

• Entering the last payment or the average payment instead of the first. The formula starts from the first year's payment and grows it forward.
• Typing 0.07 and 0.03 for the rates. Both fields are percents, so enter 7 and 3.
• Mixing a monthly payment with annual rates. All inputs are yearly, so a monthly amount must be turned into a yearly total first.
• Entering a fractional number of years such as 25.5, or a rate of −100% or lower. Those give no result.
• Expecting growth to be limited by the discount rate. If growth is higher than the discount rate the tool still returns a value, which can be very large and depends heavily on the assumption of a steady raise.