Perpetuity is a series of never-ending payments. This suite of perpetuity calculators allows you to calculate perpetuity to define the present value, payment or annual interest rate. We also provide guide on perpetuities and business considerations with perpetuity calculations.
Do you think you have a proper understanding of cash flow in your company? The term perpetuity is defined as something that goes on indefinitely. In corporate financing terms it means the same but it refers to money, be it shares and bonds held by your company or an investment made by companies in real estate, whatever gives you a never ending annuity can be defined as perpetuity of your company. However you need to consider various other factors when it comes to calculating it.
The perfect example of perpetuity is bonds offered by the UK government, which are also known as British consol. Bondholder, once the bonds are purchased they start getting annual interest payments and they keep attracting interest as long as they hold the bond or the government cancels the consol.
A real estate investment can be considered as a good example of perpetuity. When someone purchases a property and rents it out, the owner is entitled to infinite cash flow in the form of rent amount as long as the property stays occupied by renters.
The perpetuity calculator developed by iCalculator is a powerful yet simple and easy-to-use tool to calculate your company's perpetuity. You can use the calculator in three different ways:
Understanding perpetuity can help any business in many ways, it can not only help the financial decision makers of the company to understand the cash flow of the company in a better way but it can also help in improving their financial standing by applying perpetuity to their long term goals.
Also, when a company calculates its perpetuity, it has a better track of investments, which have been made in the past, and can easily define what more investments are to be made to improve the company's cash flow in near future.
Annuities are the payments received annually and they are generally endless, which seems to be the perfect example of perpetuity. However even though they share many similar characteristics, annuities are not technically a form of perpetuity. The major differences between the two are as following.
Although perpetuity seems more theoretical and raises an obvious question that can something really last forever? Technically yes, but there is a huge factor that needs to be considered before depending on various calculations:
Inflation - The numbers may look really good when you first do the calculations, however, the payouts do diminishes gradually because of inflation, especially when they are being considered as endless.
All in all we can say that though there are things we should consider before we depend on perpetuity calculations, iCalculator has made a complicated task easy. The Perpetuity calculator can help you in staying aware and managing your finances effectively in many ways.
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