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

Calculating IRR, NPV, and NFV for Monthly Cash Flows

A real estate investor wishes to purchase/finance a piece of property
for $225,000. She'd like a return of 10% and expects to sell it after
five years for $275,000. She expects the monthly cash flows below.
Find the IRR, NPV and NFV, and determine whether this investment
is desirable.
Note: since payments are expected to be received monthly, you will need to set your
Payments per Year to 12.
Year 1
Year 2
Year 3*
Year 4*
Year 5
STEPS
Clear cash flow register
Enter payments per year
Enter initial investment (as a negative entry
indicating a cash outlay) 2 2 5 ) s – c
Enter 1st Cash Flow value 1 ) c
Enter 1st Cash Flow
frequency
Enter 2nd Cash Flow value 1 1 0 0 c
Enter 2nd Cash Flow
frequency
Enter 3rd Cash Flow value 1 2 0 0 c
Enter 3rd Cash Flow
frequency*
Enter final (4th) 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
*Because the amount of monthly rent for Years 3 and 4 remains the same, this Cash
Flow amount is entered once (C-3), and the frequency for this Cash Flow is set to 24,
indicating that this amount is received for two years, or 24 total payments.
Analysis: This investment would bring an internal rate of return
of 10.26%. The NPV is over $2,000, resulting in a positive return
on investment.
Monthly Cash Flows
$1,000
$1,100
$1,200
$1,200
$275,000
KEYSTROKES
s 6
1 2 s ÷
1 2 s c
1 2 s c
2 4 s c
R
1 0 s R
R
R
— DO NOT CLEAR CASH FLOWS —
DISPLAY
"CF Cleared" 0.00
C-0 -225,000.00
C-1 1,000.00
F-1 12.00
C-2 1,100.00
F-2 12.00
C-3 1,200.00
F-3 24.00
C-4 275,000.00
10.26%
"run" 2,127.07
3,194.37
10.00%
(Cont'd)
U ' G
SER S UIDE
12.00
— 79