Finance Calculator
Texas Instruments BA II +


NPV and IRR: Using the Cash Flow Register.

3 KEYS:

CF: used to enter even or uneven cashflows. The up and down arrows move between sequential CF and Frequency entries. The location of the CF key is on the second row second column of the calculator.

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. The location of the NPV key is on the second row third column of the calculator.

IRR: The IRR button is used to compute the internal rate of return. This being the rate at which the NPV equals zero. The location of the IRR key is on the second row fourth column of the calculator.

Finding the NPV and the IRR of a stream of uneven cashflows.

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.

CF, 2^nd CLR Work,
CF0 = 400+/-, ENTER, down arrow
CO1 = 100, ENTER, down arrow
FO1 = 1 (default), ENTER, down arrow
CO2 = 200, ENTER, down arrow
FO2 = 2, sets frequency of cashflow #2 at 2, ENTER, down arrow
CO3 = 300, ENTER

Press the NPV button and enter 10 for the rate the CF’s will be discounted at (I=10).  
Press ENTER and down arrow and then compute (CPT). 
The screen shoulc display NPV = 211.365.  Press the IRR key and the calculator will compute 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.

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