|PVEGPerp (DisAER, AnnGrowthRate)|
|Present Value of an Exponentially Growing Perpetuity|
|This function uses standard annuity formulae to evaluate the Present Value of an Exponentially Growing Perpetuity where the growth is applied annually, initially at the end of the first year.|
|Unary||Unary Value ( ie value of $1)|
It"s been said many times in this documentation, but the standard annuity formulae, upon which this function is based, assumes payments are made in arrear. ie No payment is made at time zero, the first payment is at the end of the first period. Although the annuity formulae can be used for any length of period providing the discount and growth rates are adjusted accordingly, if you stick to the definition of this function and provide annual rates, the first payment will be at the end of the first YEAR, ie at YEAR 1.
With any annuity formula involving GROWTH, the key confusion is WHEN the growth commences. The answer is - at the end of year 1. But that does NOT mean the YEAR 1 payment is grown/inflated! In fact it means that growth starts at year 1, and therefore the first grown payment is at YEAR 2. So the payments are: Time 0 - 0, Time 1 - 1, Time 2 - (1+g), Time 3 - (1+g)^2, etc.