Cash Flow Calculations
95
Calculating Net Present Value and Net Future Value
The net present value (NPV) function is used to discount all cash flows to the front of the time
line using an annual nominal interest rate that you supply.
To calculate NPV or NFV:
1. P r e s s ]O: and store the desired number of periods per year in P/YR.
2. Enter the cash flow data.
3. Store the annual nominal interest rate in I/YR and press \½.
4. If you have just calculated NPV, press \« to calculate NFV.
Example: A Discounted Contract, Uneven Cash flows
You have an opportunity to purchase a contract with the following cash flows:
jV::Æ1GÆ
3 2.00 Inputs new cash flow
amount and repeat value.
Displays the new repeat
value, 2.00, for CF
3
.
1JG::yÆ1G
Æ
4 is displayed first, with
no value followed by
4 -1,200, then 4 2.00
Inputs new cash flow, CF
4
,
and repeat value.
]X
3,600.00 Displays total of the cash
flows.
M
0.00 Exit the editor.
\Á
58.97 Calculate the new annual
yield.
Table 8-5 Editing cash flows
Keys Display Description
Table 8-6 Example of a contract with uneven cash flows
End of Month Amount
45,000.00
95,000.00
10 5,000.00
15 7,500.00
25 10,000.00
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