Sharp EL-738 operation manual 2314, Calculating the present value of variable cash flows

Procedure	Key operation	Display
Enter cash flow data.	,12000 J	DATA SET:CF
		000
	3000 J	DATA SET:CF
		100
	5000 >3 J	DATA SET:CF
		200
	4000 J	DATA SET:CF
		300
Return to the initial dis-	s	000
play in NORMAL mode.

*1 If there is cash flow data stored, press >.bto clear it.

2. Calculate IRR.

Procedure	Key operation	Display
Select discounted cash	.<.b
flow analysis, and set all		RATE(I/Y)=
the variables to default
		000
values.
Calculate IRR (RATE	@	RATE(I/Y)=
(I/Y)).		2314

Answer: The net present value of the cash flows equals zero at an IRR of 23.14%.

2 Calculating the present value of variable cash flows

Your company has prepared forecasts for the development costs and operating profits of the next generation of your product. Development costs for each of the next three years (Years 1 to

3)will be $50,000. Manufacturing equipment costing $100,000 will be purchased at the end of Year 3. Annual profits for the five-year product life (from Year 4 to Year 8) are projected to be $80,000. The salvage value of the manufacturing equipment at the end of Year 8 is $20,000. Given a 12% discount rate, should your company proceed with the product development?

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