Section 4: Additional Financial Functions 63
Since NPV is positive, the investment would increase the financial value of the
investor’s assets by $907.77.
Calculating Internal Rate of Return (IRR)
1. Enter the cash flows using either of the methods described above under
Calculating Net Present Value.
2. Press fL.
The calculated value of IRR appears in the display and also is automatically
stored in the i register.
Note: Remember that the L function may take a significant amount of
time to produce an answer, during which the calculator displays running.
Example: The NPV calculated in the preceding example was positive,
indicating that the actual rate of return (that is, the IRR) was greater than the
13½% used in the calculation. Find the IRR.
Assuming the cash flows are still stored in the calculator, we need only press
fL:
Note that the value calculated by L is the periodic rate of return. If the cash
flow periods are other than years (for example, months or quarters), you can
calculate the nominal annual rate of return by multiplying the periodic IRR by
the number of periods per year.
As noted above, the calculator may take several seconds or even minutes to
produce an answer for IRR. This is because the mathematical calculations for
3ga
3.00
Number of times this cash flow
amount occurs consecutively.
9100gK
9,100.00
Next cash flow amount.
9000gK
9,000.00
Next cash flow amount.
2ga
2.00
Number of times this cash flow
amount occurs consecutively.
4500gK
4,500.00
Next cash flow amount.
100000gK
100,000.00
Final cash flow amount.
:n
7.00
Seven different cash flow amounts
have been entered.
13.5¼
13.50
Stores i.
fl
907.77
NPV
Keystrokes Display
fL
13.72
IRR is 13.72%.
Keystrokes Display
