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Finance

Net present value of cash flows

Add up uneven cash flows after discounting each back to today.

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Net present value (NPV) answers: after accounting for the interest I could have earned elsewhere, is this investment worth it? Each future cash flow is discounted back to today, then everything is added up. A positive NPV means the project beats the discount rate.

Example: pay 10,000 now (negative), then receive 3,000, 4,200 and 6,800 at the end of years 1, 2 and 3. The discount rate is 10%.

Classic Financial II

Start on the main screen: Press 2ND then CPT (QUIT) to leave a worksheet and return to the plain calculator. ON/OFF also drops back to the standard screen and clears an error.

  1. Open the cash flow worksheet with the CF key. The first entry, CF0, is today. Type 10000 and press the minus-sign key, then enter.

    CF10000+/-ENTER

  2. Move down to the first cash flow, C01. Type 3000 and enter, then press down to its frequency line F01 (leave it at 1).

    ↓3000ENTER↓

  3. Press down to C02 and enter 4200, then skip its frequency line with down and enter 6800 as C03.

    ↓4200ENTER↓↓6800ENTER

  4. Press NPV, type the 10% rate and enter, then move down and press CPT.

    NPV10ENTER↓CPT

You should seeNPV= 1,307.29

Classic Financial II key reference · Classic Financial II manual

RPN Financial 12

Start on the main screen: There is no menu to leave: the display always shows the X register. Press f then R/S (P/R) to leave program mode, and clear a pending prefix by pressing ON.

  1. Type the starting outlay, make it negative with CHS, and store it with g, then PV (CF0).

    10000CHSgCF₀PV

  2. Store each later flow with g, then PMT (CFj).

    3000gCFjPMT4200gCFjPMT6800gCFjPMT

  3. Enter the discount rate in i, then press f and PV (NPV).

    10ifNPVPV

You should see1,307.29

RPN Financial 12 key reference · RPN Financial 12 manual

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