6.4 Cash Flow on the BAII Plus

Example 6.4.1

You invested $1,000 and received $300 for the first 2 years at the end of each year. At the end of the 3rd year, you sold your investment for $800. The minimum Annual Rate of Return (MARR) is 14%.
Cash Flow diagram

The NPV is:

[latex]NPV =-$1,000 +\frac{$300}{(1.14)^1}+\frac{$300}{(1.14)^2}+\frac{$800}{(1.14)^3}[/latex]

But we will solve using the BAII Plus Calculator:

Step To Press Display
1 Select Cash Flow worksheet [CF]  

CFo=   (previous entered value)

2 Clear previous work [2ND] [CE|C]  

CFo=   0

3 Enter initial investment, negative for outflows. [1][0][0][0][+\-][ENTER] CFo =  – 1,000
4 Enter 1st cash flow [↓][3][0][0][ENTER] C01=     300
5 Enter frequency of 1st cash flow

(frequency =2)

[↓][2][ENTER] F01=   2
6 Enter 2nd cash flow [↓][8][0][0][ENTER] C02=     800
7 Enter frequency of 2nd  cash flow [↓][1][ENTER] F02=    1
8 To find NPV [NPV] I =     0
9 Enter the discount rate [1][4][ENTER] I =     14
10 Compute NPV [↓][CPT] NPV =   33.97536624
11 To find IRR [IRR] IRR =   0
12 Compute IRR [CPT] IRR =    15.69595604

We will write this as:

 

CF0 = -1000
C01 = 300 F01 = 2
C02 = 800 F02 = 1

 

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