Casio fx-9750G PLUS - Manual (Page 365)

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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