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14: Additional Examples 209
File name : English-M02-1-040308(Print).doc Print data : 2004/3/9
Keys: Display: Description:
Displays TVM menu.
1
e
Sets 1 payment per year
and Begin mode.
35 Stores years until
retirement.
8.175
-
28
%
Calculates and stores
interest rate diminished by
tax rate.
0
Stores no present value.
3000
&
Stores annual payment.
Calculates future value.
8
0
Calculates present-value
purchasing power of the
above FV at 8%
inflation.
Modified Internal Rate of Return
When there is more than one sign change (positive to negative or
negative to positive) in a series of cash flows, there is a potential for
more than one
IRR%. For example, the cash-flow sequence in the
following example has three sign changes and hence up to three
potential internal rates of return. (This particular example has three
positive real answers: 1.86, 14.35, and 29.02% monthly.)
The Modified Internal Rate of Return (MIRR) procedure is an alternative
that can be used when your cash-flow situation has multiple sign
changes. The procedure eliminates the sign change problem by utilizing
reinvestment and borrowing rates that you specify. Negative cash flows
are discounted at a
safe rate that reflects the return on an investment in
v
v