In layman word, perpetuities are payment that given forever.
PV = PMT/i
If the periodic payment (PMT) grow by 3% per year due to inflation, the formula will be
PV= PMT/(i-g)
PV= present value
PMT=payment
i = interest rate
g= growth rate
eg: Find the PV of $300 payment for an indefinite time at the interest rate of 10%
PV= 300/ 0.1
NOTE that here we use 0.1 for 10% instead of 10, only when you key in [I/Y] you put 10 for 10%.
If the payment grow by 3% per year due to inflation, calculation will be
PV= 300/(0.1-0.03)
NOTE: 0.03 to indicate 3%
