This is the second page of the introduction to the
additional features of the advanced financial
calculator. The first page of this
tutorial is here.
Additional Features of the Advanced Financial Calculator
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Input Editing Features
There are two new keys on the advanced functions screen that make it
easier to enter numeric data. The CHS key is used to change the
sign of a number in the x register. If the number was entered as
a positive value, press the CHS key to change it to a negative
value. Press the CHS key again to change it back to a positive
value.
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The advanced financial calculator also has a backspace (BS) key
that can be used to erase the last digit entered.
Discounted Cash Flow Functions
Discounted cash flow analysis is a name given to procedures that are used
to evaluate the profit that is likely to accrue from a project. When money
is to be invested in a project, investors would like to know whether the
returns of the investment will exceed the costs, which must include the
time value of money.
There are two commonly used methods for discounted cash flow analysis.
Those two methods are Net Present Value and Internal Rate of Return. The
advanced financial calculator supports both methods.
Calculating Net Present Value
The discounted cash flow techniques use data that is stored in the cash
flow registers. You can enter data into these registers using the CF0
and CFn keys.
The CF0 key is used to record the initial cash flow of an
investment. This value is stored in the present value register, so
you can use either the CF0 or the PV key to store this value. To
use these keys, just key the numeric value and then press the function key
(CF0 or PV).
All other cash flows, after the initial payment, are recorded using the
CFn key. Each time that you store a value with the CFn key,
the number of periods annunciator, in the upper left corner of the
screen, will increment. The number of periods annunciator tells
you how many subsequent (after the initial) cash flows have been recorded.
The only other value needed to calculate NPV is the cost of capital. The
cost of capital is the interest rate that you must pay for investment
capital. You must set this value using the I key of the main keypad
screen.
An investor should accept any project that has a positive net present
value and reject any project that has a negative NPV. When deciding
between two mutually-exclusive projects, an investor should choose the
project that has the highest NPV.
On the next page, we'll take a look at an
example.
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