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7: Cash Flow Calculations 101
File name : English-M02-1-040308(Print).doc Print data : 2004/3/9
Table 7-2. The CALC Menu for CFLO Lists
Menu Label Description
Calculates the sum of the cash flows.
* Calculates the internal rate of return—the interest
(discount) rate at which the net present value of the
cash flows equals zero.
Stores the periodic interest rate, expressed as a
percentage (sometimes called cost of capital,
discount rate, or required rate of return).
Given I%, calculates the net present value—the
present value of a series of cash flows.
Given I%, calculates the net uniform series—the
dollar amount of constant, equal cash flows having
a present value equivalent to the net present value.
Given I%, calculates the net future value of a series
of cash flows by finding the future value of the net
present value.
*
The calculations for internal rate of return are complex and may take a
relatively long time. To interrupt the calculation, press any key. In certain
cases, the calculator displays a message indicating that the calculation
cannot continue without further information from you, or that there is no
solution. Refer to appendix B for additional information about calculating
IRR%.
About the Internal Rate of Return (IRR%). A “conventional investment”
is considered attractive if IRR% exceeds the cost of capital. A
conventional investment meets two criteria—(1) the sequence of cash
flows changes sign only once, and (2) the sum (TOTAL) of the cash flows
is positive.
Remember that the calculator determines a periodic IRR%. If the cash
flows occur monthly, then IRR% is a monthly value, too. Multiply it by 12
for an annual value.