Calculating Irr, Npv, And Nfv For Annual Cash Flows - Calculated Industries 3430 User Manual

Calculating IRR, NPV, and NFV for Annual Cash Flows

A real estate investor wishes to purchase/finance a piece of property
for $225,000. He'd like a return of 9% and expects to sell it after five
years for $275,000. He expects the annual cash flows below. Find
the IRR, NPV and NFV, and determine whether this investment is
desirable.
Note: since payments are expected to be received annually, you will need to set your
Payments per Year to 1.
Year 1
Year 2
Year 3
Year 4
Year 5
STEPS
Clear cash flow register
Set payments per year
to one
Enter initial investment (as a negative entry
indicating a Cash outlay) 2 2 5 ) s – c
Enter 1st Cash Flow value 1 6 ) c
Enter 2nd Cash Flow
Enter 3rd Cash Flow
Enter 4th Cash Flow
Enter 5th (final) Cash Flow 2 7 5 ) c
Find the IRR
Enter the desired rate of return
and calculate NPV
Find the NFV
Re-display the desired
rate of return
Clear registers*
*This will clear Cash Flows and reset payments per year to 12 (e.g. monthly) for per-
forming the other examples in this guide.
Analysis: This investment would provide an internal rate of
return greater than the desired rate of return, making this a
positive investment.
78 — Q
UALIFIER
Annual Cash Flow
$16,000
$16,600
$16,900
$17,200
$275,000
KEYSTROKES
s 6
1 s ÷
1 6 6 0 0 c
1 6 9 0 0 c
1 7 2 0 0 c
R
9 s R
R
R
s x
P ® III
LUS FX
DISPLAY
"CF Cleared" 0.00
C-0 -225,000.00
C-1 16,000.00
C-2 16,600.00
C-3 16,900.00
C-4 17,200.00
C-5 275,000.00
"run" 9.83%
"run" 7,616.73
11,719.29
9.00%
"All Cleared" 0.00
1.00