1. What is the Constant Growth Formula?

The Constant Growth Formula calculates the future value of an investment or quantity that grows at a constant rate over time. It's widely used in finance, economics, and population studies to project future values based on current values and growth rates.

2. How Does the Calculator Work?

The calculator uses the Constant Growth Formula:

Where:

• \( Present \) — Current value or amount
• \( g \) — Constant growth rate per period (as decimal)
• \( n \) — Number of periods
• \( Future \) — Projected future value

Explanation: The formula compounds the growth rate over each period to calculate the future value.

3. Importance of Growth Calculation

Details: Understanding growth projections is essential for financial planning, investment analysis, business forecasting, and demographic studies.

4. Using the Calculator

Tips: Enter present value (must be positive), growth rate (can be positive or negative), and number of periods (must be positive integer). Growth rate should be entered as decimal (e.g., 5% = 0.05).

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between simple and compound growth?
A: Simple growth adds a fixed amount each period, while compound growth multiplies by a growth factor, leading to exponential growth.

Q2: Can the growth rate be negative?
A: Yes, a negative growth rate represents decline or depreciation over time.

Q3: What time periods can be used?
A: The formula works for any consistent time period (years, months, etc.) as long as the growth rate matches the period.

Q4: How accurate are these projections?
A: Accuracy depends on the assumption of constant growth, which may not hold true in real-world scenarios over long periods.

Q5: Can this formula be used for stock valuation?
A: Yes, it's the basis for the Gordon Growth Model used to value stocks with constant dividend growth.