Cash Flow (Investment Appraisal); Npv; Nfv; Irr - Casio fx-9860G Series User Manual

7-4 Cash Flow (Investment Appraisal)

This calculator uses the discounted cash fl ow (DCF) method to perform investment appraisal
by totalling cash fl ow for a fi xed period. This calculator can perform the following four types of
investment appraisal.
• Net present value (
• Net future value (
• Internal rate of return (
• Payback period* (
* The payback period (
When the annual interest rate (
SPP
( ).
A cash fl ow diagram like the one shown below helps to visualize the movement of funds.
With this graph, the initial investment amount is represented by
CF
later is shown by
Investment appraisal can be used to clearly determine whether an investment is realizing
profi ts that were originally targeted.

NPV

NPV = CF NPV = CF
n
: natural number up to 254

NFV

NFV = NPV × (1 + i ) NFV = NPV × (1 + i )

IRR

0 = CF 0 = CF
NPV
In this formula,
however, that minute fractional values tend to accumulate during the subsequent calculations
performed automatically by the calculator, so
becomes more accurate the closer that
7-4-1
Cash Flow (Investment Appraisal)
NPV
)
NFV
)
IRR
)
PBP
)
PBP
) can also be called the "discounted payback period" (
I
%) is zero, the
CF CF
CF CF
1 1
CF CF
0 0
CF
, two years later by
1
CF CF CF CF
1 1
+ + + +
0 0
(1+ i) (1+ i) (1+ i) (1+ i)
n n
CF CF CF CF
1 1 2 2
+ + + +
0 0
2 2
(1 + i ) (1 + i ) (1 + i ) (1 + i )
IRR
= 0, and the value of
NPV
20070201
PBP
is called the "simple payback period"
CF CF
5 5
CF CF CF CF
3 3
2 2 CF CF
4 4
CF
, and so on.
2
CF CF
2 2 3 3
+ + + ... + + ... +
2 2 3 3
(1+ i) (1+ i)
CF CF CF CF
3 3
+ + + ... + + ... +
3 3
(1 + i ) (1 + i ) (1 + i ) (1 + i )
i
is equivalent to × 100. It should be noted,
NPV
never actually reaches exactly zero.
approaches to zero.
DPP
CF CF
7 7
6 6
. The cash fl ow one year
0
I % I %
CF CF
n n
i = i =
n n
(1+ i) (1+ i)
100 100
n n
n n
IRR
).