Appendix B: More About Calculations

IRR/YR Calculations

The calculator determines IRR/YR for a set of cash flows using mathematical formulas that search for the answer. The process finds a solution by estimating an answer and then using that estimate to do another calculation. This is called an iterative process.

In most cases, the calculator finds the desired answer, since there is usually only one solution to the calculation. However, calculating IRR/YR for certain sets of cash flows is more complex. There may be more than one (or no) mathematical solution to the problem.

Possible Outcomes of Calculating IRR/YR

These are the possible outcomes of an IRR/YR calculation:

•Case 1. The calculator displays a positive answer. This is the only positive answer. However, one or more negative answers may exist.

•Case 2. The calculator displays a negative answer and no message.This is the only answer.

•Case 3. The calculator displays: No Solution. There is no answer. This situation might be the result of an error, such as a mistake in keying in the cash flows. A common mistake that results in this message is putting the wrong sign on a cash flow. A valid cash-flow series for an IRR/YR calculation must have at least one positive and one negative cash flow.

Range of Numbers

The largest positive and negative numbers available on the calculator are ± 9.99999999999

×10499; the smallest positive and negative numbers available are ±1 × 10–499. Underflow briefly displays UFLO and then displays zero. Refer to the messages OFLO and UFLO in Appendix C.

Equations

Business Percentages and Break-even Calculations

⎛PRC – COST⎞

⋅ 100

⎛PRC – COST⎞

⋅ 100

MAR = ⎝

---------------------------------PRC-

⎠

MU = ⎝---------------------------------COST-⎠

⎛NEW – OLD⎞

⋅ 100

PROFIT = (SP-VC) x UNITS - FC

%CHG = ⎝

-------------------------------OLD

⎠

Probability

P

C

=

n!

(-----------------n– r)!

=

n!

(----------------------n– r)!r!

Appendix B: More About Calculations

I