Finance Calculator
Texas Instruments 83

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NPV and IRR: Using the Cash Flow Register.

NPV: The NPV key is used to compute the net present value of a stream of cashflows. After the stream has been inputed, an interest rate must be entered to discount the cashflow. Once all the factors are present, the NPV can be computed.

IRR: The IRR is used to compute the internal rate of return. This being the rate at which the NPV equals zero.

Finding the NPV and the IRR of a stream of uneven cashflows use the cash flow functions in menu items 7 and 8

Beginning with a cash outflow (investment) of $400, a project will result in 4 inflows of unequal amounts, spaced evenly, of 100, 200, 200, and 300 dollars.

To find NPV: 2nd, FINANCE, scroll down to 7: npv( and then press ENTER

Rate = 10%
CF0 = -400
CO1 = 100
CO2 = 200
CO3 = 300
FO1 = 1
FO2 = 2
FO3 = 1

The equation: npv (Rate, CF0, {CF List}, {CF Frequency}
It should look like: npv( 10, -400, {100,200,300}, {1,2,1} and then press ENTER
The screen should display NPV = 211.365

Another way of using this function without putting the CF Frequency:
Instead of entering the CF Frequency, repeat CO2
therefore in the CF List it should look like: npv(10, -400, {100,200,200,300} and press ENTER to get NPV = 211.365

To find IRR: 2nd, FINANCE, scroll down to 8: irr( and then press ENTER
irr (CF0, {CF List}, {CF Frequency}

it should look like: irr(-400, {100,200,300},{1,2,1} and then press ENTER
The screen should displaying a figure of IRR = 28.9.  At a discount rate of 28.9% the net present value of the cash flows will equal 0.

Another way of using this function without putting the CF Frequency:
Instead of entering the CF Frequency, repeat CO2
therefore in the CF List it should look like: irr(-400, {100,200,200,300} and then press ENTER to get IRR = 28.90

We can use another approach to solve this problem. That is to create two lists for the cash flow and the cash flow frequency to input the npv equation.

Step one: create a list for the cash flow entries above.
Press 2nd, { (can be found on fifth row third column) enter the cash flow: 100,200,300 ( comma is used to seperate the numbers) and 2nd, } to close the list. Now press STO arrow (above the on key), and then name the list to CF. To do so, press ALPHA (the green key) before each alphabat. (that is, ALPHA, C, ALPHA, F) at the end press ENTER.

Step two: create the second list for the cash flow frequency.
Press 2nd, { (can be found on fifth row third column) enter the cash flow fequency: 1,2,1 and 2nd, } to close the list. Now press STO arrow (above the on key), and then name the list to CFF. To do so, press ALPHA (the green key) before each alphabat. (that is, ALPHA, C, ALPHA, F, ALPHA, F) at then press ENTER.

Step three:
To find NPV: 2nd, FINANCE, scroll down to 7: npv( and then press ENTER
The equation: npv (Rate, CF0, {CF list}, {CF Frequency list}
npv (10, -400 (CF0 is not in the CF list), calcul1.jpg (727 bytes)CF (go to 2nd, LIST, under NAMES, pick CF (this where the CF list is stored), calcul1.jpg (727 bytes)CFF (follow the same instruction as above) press ENTER after all the steps are finished.
npv = 211.37

Step Four:
To find IRR: 2nd, FINANCE, scroll down to 8: irr( and then press ENTER
The equation: irr (CF0, {CF List}, {CF Frequency}
irr (-400, calcul1.jpg (727 bytes)CF, calcul1.jpg (727 bytes)CFF and then press ENTER
irr = 28.9

Note: To delete the old list under NAMES: go to 2nd MEM (above the ENTER key), choose 2: Delete, click ENTER, and choose 4: List... click ENTER. From here choose the unnecessary lists delete them by pressing the ENTER key.

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Last Updated on 1 May 2002, e-mail any comments to: robert.balik@wmich.edu