Perpetuity calculations are used in finance to value an infinite series of cash flows. A perpetuity is a type of annuity that provides continuous cash flows indefinitely. These calculations are important for assessing investments that generate consistent cash flows over an extended period.

The formula for the present value (PV) of a perpetuity is:

PV= CF/r

where CF is the cash flow received each period, and r is the discount rate. If the cash flow grows at a constant rate, the formula adjusts to: 

PV= CF/r-g

where g is the growth rate. This method allows investors to determine the finite present value of an endless series of payments, providing a practical way to evaluate investments that produce ongoing returns.