Table 7-2. The CALC Menu for CFLO Lists

Menu Label

Description

Calculates the sum of the cash flows.

* Calculates the internal rate of return—the interest (discount) rate at which the net present value of the cash flows equals zero.

Stores the periodic interest rate, expressed as a percentage (sometimes called cost of capital, discount rate, or required rate of return).

Given I%, calculates the net present value—the present value of a series of cash flows.

Given I%, calculates the net uniform series—the dollar amount of constant, equal cash flows having a present value equivalent to the net present value.

Given I%, calculates the net future value of a series of cash flows by finding the future value of the net present value.

*The calculations for internal rate of return are complex and may take a relatively long time. To interrupt the calculation, press any key. In certain cases, the calculator displays a message indicating that the calculation cannot continue without further information from you, or that there is no solution. Refer to appendix B for additional information about calculating IRR%.

About the Internal Rate of Return (IRR%). A “conventional investment” is considered attractive if IRR% exceeds the cost of capital. A conventional investment meets two criteria—(1) the sequence of cash flows changes sign only once, and (2) the sum (TOTAL) of the cash flows is positive.

Remember that the calculator determines a periodic IRR%. If the cash flows occur monthly, then IRR% is a monthly value, too. Multiply it by 12 for an annual value.

7: Cash Flow Calculations 101

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