Finance Calculator HP 10BII Growing Annuity   A growing annuity is a finite number of cash flows growing at a constant rate.   The formula for the present value of a growing annuity is: Problem: Stuart Gabriel, a second-year MBA student, has just been offered a job at \$80,000 a year. He anticipates his salary increasing by 9 percent a year until his retirement in 40 years. Given an interest rate of 20 percent, what is the present value of his lifetime salary? Clear time value of money memory: Orange key, C ALL Compounding should remain at P/Y = 1, C/Y = 1. First step: find out I and PMT I = {(interest rate-growth rate)/(1+growth rate)}*100   = {(.20-.09)/(1+.09)}*100   =10.09 Press Orange key, STO, 1 to store the number PMT = Current Annual Salary/ (1+growth rate)          = (80,000/1.09)          =73,394.50 Press Orange key, STO, 2 to store the number Second Step: enter the following N = 40, number of payment/cash flows in the growing annuity. I = press RCL, 1 to recall the number we saved PV = Unknown PMT = RCL, 2 to recall the number FV = 0 PV = \$711,731   Last Updated on 1 May 2002, e-mail any comments to: robert.balik@wmich.edu