Unformatted text preview: pute the net present value of the series of cash flows. The calculator computes and displays the value. Procedure: Computing Internal Rate of Return
1. Press . IRR is displayed, along with the previous value. 2. Press
to compute the internal rate of return.
The calculator computes and displays the value. Chapter 3: Using the Cash Flow Worksheet 33 Example: Cash Flow Application
A company plans to pay $7,000 for a new machine. The company would like
a 20% annual return on its investment. Over the next six years, the company
expects to receive the annual cash flows shown below.
Year Cash Flow Number Cash Flow Estimate 1 1 3,000 2–5 2 5,000 each year 6 3 4,000 The following time line shows that these cash flows are a combination of
equal and unequal values. Because the initial cash flow (CFo) is an outflow,
it is a negative value. On the next few pages, you will enter cash flow data, edit the data when a
change is necessary, and compute the net present value and internal rate of
return. Example: Entering the Data
Enter the data from the table above.
Procedure Keystrokes Display Select Cash Flow
worksheet. CFo (old contents) Clear worksheet. CFo = 0.00 CFo = 7,000.00 Enter initial cash flow. 7000 Enter cash flow for first
year. 3000 C01 =
F01 = 3,000.00
1.00 Enter cash flows for
years two through five. 5000
4 C02 =
F02 = 5,000.00
4.00 Enter cash flow for sixth
year. 4000 C03 =
F03 = 4,000.00
1.00 34 Chapter 3: Using the Cash Flow Worksheet Example: Editing the Data
After entering the data, you learn that the cash flow projections you were
given were incorrect. The $4,000 cash-flow value should occur in the
second year instead of the sixth. Otherwise, the entries are correct.
Year Cash Flow
Estimate (Original) Cash Flow
Estimate (Corrected) 1 3,000 3,000 2 5,000 4,000 3 5,000 5,000 4 5,000 5,000 5 5,000 5,000 6 4,000 5,000 Edit the existing data in the Cash Flow worksheet by deleting the $4,000
value for year 6 and inserting it for year 2.
Procedure Keystrokes Display Move to...
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- Summer '09