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46 Cash Flow Worksheet
When more than one solution exists, the calculator displays the one
closest to zero. Because the displayed solution has no financial
meaning, you should use caution in making investment decisions
based on an
IRR computed for a cash-flow stream with more than
one sign change.
The time line reflects a sequence of cash flows with three sign
changes, indicating that one, two, or three
IRR solutions can exist.
• When solving complex cash-flow problems, the calculator might not
find
IRR, even if a solution exists. In this case, the calculator displays
Error 7 (iteration limit exceeded).
Example: Solving for Unequal Cash Flows
These examples show you how to enter and edit unequal cash-flow data
to calculate:
• Net present value (
NPV)
• Internal rate of return (IRR)
A company pays $7,000 for a new machine, plans a 20% annual return on
the investment, and expects these annual cash flows over the next six
years:
As the time line shows, the cash flows are a combination of equal and
unequal values. As an outflow, the initial cash flow (CFo) appears as a
negative value.
Year Cash Flow Number Cash Flow Estimate
Purchase
CFo
-$7,000
1
C01
3,000
2–5
C02
5,000 each year
6
C03
4,000