Table 8-2 Example 1: a short term investment

KeysDisplay Description

Y:::y¤

-4,000.00

Enters second cash flow. Note

 

 

(CF 2 flashes, then

the CFLO and CF annunciators.

 

disappears)

 

 

 

 

JJjSV7Gd¤

11,765.29

Enters third cash flow. Note the

 

(CF 3 flashes, then

CFLO and CF annunciators.

 

disappears)

 

\Á

aJG

38.98Calculates annual nominal yield.

3.25Monthly yield.

NPV and IRR/YR: Discounting Cash Flows

Chapter 5 titled, Picturing Financial Problems demonstrates the use of cash flow diagrams to clarify financial problems. This section describes discounted cash flows. The NPV, NFV and IRR/YR functions are frequently referred to as discounted cash flow functions.

When a cash flow is discounted, you calculate its present value. When multiple cash flows are discounted, you calculate the present values and add them together.

The net present value (NPV) function finds the present value of a series of cash flows. The annual nominal interest rate must be known to calculate NPV.

The net future value (NFV) function finds the value of the cash flows at the time of the last cash flow, discounting the earlier cash flows by the value set for the annual nominal interest rate.

The internal rate of return (IRR/YR) function calculates the annual nominal interest rate that is required to give a net present value of zero.

The utility of these two financial tools becomes clear after working a few examples. The next two sections describe organizing and entering your cash flows. Examples of NPV, NFV, and IRR/YR calculations follow.

Organizing Cash Flows

The cash flow series is organized into an initial cash flow (CF0) and succeeding cash flow groups (up to 44 cash flows). CF0 occurs at the beginning of the first period. A cash flow group consists of a cash flow amount and the number of times it repeats.

For example, in the following cash flow diagram, the initial cash flow is -11,000. The next group of cash flows consists of six flows of zero each, followed by a group of three 1,000 cash flows. The final group consists of one 10,000 cash flow.

Cash Flow Calculations 91

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HP 10bII+ Financial manual JJjSV7Gd¤, Ajg, NPV and IRR/YR Discounting Cash Flows, Organizing Cash Flows
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10bII+ Financial specifications

The HP 10bII+ Financial Calculator is a versatile and powerful tool designed to meet the needs of finance students, professionals, and anyone involved in financial planning and analysis. Known for its compactness and user-friendly interface, this calculator incorporates a range of features specifically tailored for financial calculations, making it an essential gadget for banking, real estate, and investment analysis.

At the heart of the HP 10bII+ is its ability to perform a wide variety of financial functions, including time value of money calculations, cash flow analysis, bond pricing, and depreciation. Its built-in functions facilitate the computation of interest rates, present and future values, net present value (NPV), internal rate of return (IRR), and annuities. This array of functionalities allows users to tackle complex financial problems with ease.

One of the standout technologies in the HP 10bII+ is its RPN (Reverse Polish Notation) input system, which allows for efficient data entry and calculation. Users can perform consecutive calculations without the need for parentheses, streamlining the process significantly. Alternatively, the calculator can also function with a standard algebraic input, catering to different user preferences.

The design of the HP 10bII+ is sleek and compact, making it highly portable and easy to handle. With a large, easy-to-read display, it ensures that users can view their calculations clearly, even in low-light environments. The keys are well-spaced and tactile, allowing for a comfortable typing experience during intensive calculations.

The calculator also offers a range of memory functions, enabling users to store and recall important values easily. This is particularly useful for financial professionals who must deal with multiple calculations and refer back to previous results frequently.

Additionally, the HP 10bII+ is powered by two AAA batteries, providing a long battery life that ensures reliability during extended use. It also features an automatic shut-off function, which conserves battery life when the calculator is not in use.

In summary, the HP 10bII+ Financial Calculator is a high-performance device that combines essential financial functions with user-friendly design and robust technology. Whether for educational purposes or professional finance work, its capabilities make it an invaluable asset for anyone dealing with financial calculations and decision-making.
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