42
Pr
ocedure
K
e
y
operation
Displa
y
Enter cash fl
o
w
data.
,
12000
J
DATA
SET:CF
000
3000
J
DATA
SET:CF
100
5000
>
3
J
DATA
SET:CF
200
4000
J
DATA
SET:CF
300
Retur
n to the initial dis-
pla
y in NORMAL mode
.
s
000
If there is cash fl
o
w
data stored, press
>
.
b
to
clear it.
2.
Calculate IRR.
Pr
ocedure
K
e
y
operation
Displa
y
Select discounted cash
fl o
w
analysis
, and set all
the v
a
riab
les to def
ault
v
alues
.
.
<
.
b
RATE(I/Y)=
000
Calculate IRR (RA
TE
(I/Y)).
@
R
ATE
(
I/Y
)
=
2314
Ans
wer:
The net present v
alue of the cash fl
o
w
s equals z
ero at
an IRR of 23.14%.
Calculating the present v
alue of v
ariab
le cash
fl ow
s
Y
our compan
y has prepared f
orecasts f
or the de
v
elopment costs
and oper
ating profi
ts of the ne
xt gener
ation of y
our product.
De
v
elopment costs f
or each of the ne
xt three y
ears (Y
ears 1 to
3) will be $50,000.
Man
uf
actur
ing equipment costing $100,000
will be purchased at the end of
Y
ear 3.
Ann
ual profi
ts f
or the
fi v
e-y
ear product lif
e (from
Y
ear 4 to
Y
ear 8) are projected to be
$80,000.
The salv
age v
alue of the man
uf
actur
ing equipment at
the end of
Y
ear 8 is $20,000.
Giv
en a 12% discount r
ate
, should
y
our compan
y proceed with the product de
v
elopment?
*
1
2
3 Financial FunctionsCurrent.indd 42
06.7.10 8:38:37 PM
