Calculator, HP 12 C, NPV and IRR

Finance Calculator
HP 12C

NPV and IRR: Using the Cash Flow Register.

4 KEYS:

CF0: The amount of the initial investment. g (the blue key), CF0 (below the PV key, first row third column)

CFj: The following cash flows. g, CFj (below the PMT key, first row fourth column)

Nj: This is were the frequency of the cashflows will be entered, for example if a cashflow occurs twice in a row, you would enter 2, g, Nj. (The location on calculator is: first row fifth column below FV key)

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 into the I/YR key first to discount the cashflow. Once all the factors are present, the NPV can be computed. (The location on calculator is: first row third column above the PV key). The proper way to enter the NPV would be, f (the yellow key), NPV.

IRR: This button is used to compute the internal rate of return. This being the rate at which the NPV equals zero. (The location on calculator is: first row fifth column above the FV key). The proper way to enter the IRR would be, f, IRR.

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. These cashflows will occur on a yearly basis.

Begin by clearing the register: f, REG (third row fifth column, next to the ENTER bar)
-400 (400, CHS), g, CF0
100, g, CFj
200, g, CFj
2, g, Nj (sets the frequency of the $200 payment at 2)
300, CFj

Now to obtain the answer, press f, IRR and the answer should be 28.9. To calculate the NPV of this stream of cashflows, enter 10, i for the discount rate, then f, NPV and 211.365 should appear as the Net Present Value of the stream.

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