76 Section 4: Additional Financial Functions

In summary, to enter the amounts of the cash flows and the number of times they occur consecutively:

1.Press fCLEARHto clear the financial and storage registers.

2.Key in the amount of the initial investment, press Þ if that cash flow is negative, then press gJ.

3.If the initial investment consists of more than one cash flow of the amount entered in step 2, key in the number of those cash flows, then press ga. If gais not pressed, the calculator assumes that N0 is 1.

4.Key in the amount of the next cash flow, press Þ if that cash flow is negative, then press gK. If the cash flow amount is zero in the next period, press 0gK.

5.If the amount entered in step 4 occurs more than once consecutively, key in

the number of times that cash flow amount occurs consecutively, then press ga. If gais not pressed, the calculator assumes that Nj is 1 for the CFj just entered.

6.Repeat steps 4 and 5 for each CFj and Nj until all cash flows have been entered.

With the amounts of the cash flows and the number of times they occur consecutively stored in the calculator, NPV can be calculated by entering the interest rate and pressing fl, just as described earlier.

Example: An investor has an opportunity to purchase a piece of property for $79,000; and he would like a 13.5% return. He expects to be able to sell it after 10 years for $100,000 and anticipates the yearly cash flows shown in the table below:

YearCash Flow

Year

Cash Flow

 

 

 

 

1

$14,000

6

$9,100

2

$11,000

7

$9,000

3

$10,000

8

$9,000

4

$10,000

9

$4,500

5

$10,000

10

$100,000

 

 

 

 

Since two cash flow amounts ($10,000 and $9,000) are repeated consecutively, we can minimize the number of storage registers required by using the method just described.

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