Different Types of TVOM

Growing Annuity

For example, an investment company just issued a security which will provide 10 payments, starting next year for $100 and increasing 5% per year after that. How much is this security worth if the appropriate required return is 10%? The cash flows for the next ten years are as follows:

Timeline with r equals 10%, -100 at 1,-105 at 2, -110.25 at 3, an arrow pointing to infinity, g equals 5% and P V G A equals question mark.
P V G A  equals numerator C sub 1 base denominator r minus g, left bracket, one minus numerator left parens numerator 1 plus g denominator one plus r right parens supe T base right parens.


P V G A  equals numerator 100 denominator .10 minus .05, left bracket, one minus left parens numerator 1 plus .05 denominator one plus .10 right parens supe 10 base right bracket.