Casio CFX-9850G PLUS, User'S Manual & Technical Reference

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19-4 Investment Appraisal
This calculator uses the discounted cash flow (DCF) method to perform invest-
ment appraisal by totalling cash flow for a fixed period. This calculator can perform
the following four types of investment appraisal.
• Net present value (
NPV
)
• Net future value (
NFV
)
• Internal rate of return (
IRR
)
• Pay back period (
PBP
)
A cash flow diagram like the one shown below helps to visualize the movement of
funds.
CF
0
CF
1
CF
2
CF
3
CF
4
CF
5
CF
6
CF
7
With this graph, the initial investment amount is represented by
CF
0
. The cash
flow one year later is shown by
CF
1
, two years later by
CF
2
, and so on.
Investment appraisal can be used to clearly determine whether an investment is
realizing profits that were originally targeted.
u
NPV
NPV
=
CF
0
+ + + + … +
(1+
i
)
CF
1
(1+
i
) 2
CF
2
(1+
i
) 3
CF
3
(1+
i
)
n
CF
n
n
: natural number up to 254
u
NFV
NFV
=
NPV
×
(1 +
i
)
n
u
IRR
0 =
CF
0
+ + + + … +
(1+
i
)
CF
1
(1+
i
) 2
CF
2
(1+
i
) 3
CF
3
(1+
i
)
n
CF
n
In this formula,
NPV
= 0, and the value of
IRR
is equivalent to
i ×
100. It should be
noted, however, that minute fractional values tend to accumulate during the
subsequent calculations performed automatically by the calculator, so
NPV
never
actually reaches exactly zero.
IRR
becomes more accurate the closer that
NPV
approaches to zero.
i
=
100
I