For example c02 becomes c03 4 if necessary press then

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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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