EE Pro for TI - 89, 92 Plus
Analysis - Capital Budgeting
58
Chapter 14
Capital Budgeting
This chapter covers the four basic measures of capital budgeting:
Payback Period
Net Present Value
Internal Rate of Return
Profitability Index
14.1 Using Capital Budgeting
This section performs analysis of capital expenditure for a project and compares projects against one another. Four
measures of capital budgeting are included in this section: Payback period (
Payback
), Net Present Value (
NPV
),
Internal Rate of Return (
IRR
), and Profitability Index (
PI
). This module provides the capability of entering, storing
and editing capital expenditures for nine different projects. The following equations are used in calculations:
Eq. 14.1.1
Eq. 14.1.2
Eq. 14.1.3
CFt:
Cash Flow at time t (usually years).
Payback:
The number of time periods (usually years) it takes a firm to recover its original investment.
NPV
: The present values of all future cash flows, discounted at the selected rate, minus the cost of the investment.
IRR:
The discount rate that equates the present value of expected cash flows to the initial cost of the project.
PI:
The present value of the future cash flows, discounted at the selected rate, over the initial cash outlay.
Field Descriptions - Input Screen
Project
:
(Project)
Press
¸
to select one of nine unique projects or edit the
current name of the project by pressing
†
for Cash option.
k
:
(Discount Rate per Period in %)
Enter a real number.
Payback
:
(Payback Period)
Returns a real number.
NPV
:
(Net Present Value)
Returns a real number.
IRR
:
(Internal Rate of Return)
Returns a real number (%).
PI
:
(Profitability Index)
Returns a real number.
NPV
CF
k
CF
t
t
t
n
t
=
+
−
=
=
∑
(
)
1
1
0
CF
IRR
CF
t
t
t
t
n
(
)
1
0
0
1
+
−
=
=
=
∑
PI
CF
k
CF
t
t
t
n
t
=
+
=
=
∑
(
)
1
1
0