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%.
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 |
Your Own Notes
- Are there any notes you want to take from this section? Is there anything you’d like to copy and paste below?
- These notes are for you only (they will not be stored anywhere)
- Make sure to download them at the end to use as a reference