Example: solving for unequal cash flows – Texas Instruments Calculator User Manual
Page 51
Cash Flow Worksheet
47
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
PB
,
DPB
,
IRR
, and
MOD
, 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
)
•
Net future value (
NFV
)
•
Payback (
PB
)
•
Discounted payback (
DPB
)
•
Internal rate of return (
IRR
)
•
Modified internal rate of return (
MOD
)
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