I’m trying to compute both NPV and IRR with monthly compounding and uneven cash flows on my TI BA II PLUS calculator. However I still can’t find the way to do that looking all over the internet for 2 hours already!
Let’s suppose we make an short term investment of two months with cashflows as follow:
-900$ at t=0, at t=1 (one month from now) we will receive +800$, at t=2 we will receive +300$.
To calculate IRR:
0 = -900+800/(1+IRR)^(1/12)+300/(1+IRR)^(2/12)
Let’s suppose r=5%
To calculate NPV
NPV = -900+800/1.05^(1/12)+300/1.05^(2/12)
I’ve chosen a simple example that can be easily computed by hand, but for more cashflows I need to do it with the calculator.
I hope you can help me with this, thank you so much!!!
use the cashflow (CF button) worksheet. Enter your cash flows and then hit CPT, NPV and thats where you enter discount rate. If you have multiple discount rates, compute the PV for the different time periods and sum them up. Ask if you need more clarification, I’m just on my tablet at the moment.
Sounds like your calculator is set for 12 periods per year? First thing I did when I got mine was change it to 1 period. So if I enter the cashflows into the spreadsheet as you gave me, then compute NPV and put in a discount rate of 5/12 I get NPV = $194.1960. Not exactly the same as the answer you got, but I kept the decimals when I divided r by 12, which probably explains the small difference. If you want to change the number of periods, it’s [2nd] [P/Y] 1 [Enter]. Just remember that this changes ALL PV calculations that you do.
Stelin200: You are on the right track. if the effective annual rate is 5%, then the nominal rate is not 5%. Using the ICONV worksheet, you’ll find the nominal rate is 4.88895%. For your NPV, set I = 0.40741 (this is just 1.05^(1/12) - 1 OR 4.88895%/12) and this will give you the true NPV of 194.32431. Using the same cash flows, the calculator will tell you the IRR is 17.30487%; however, this represents the compounding for one month, so the annual figure is 1.1730487^12 - 1 = 578.879%
Sens89: C/Y and P/Y are only used in the TVM worksheet. They will not affect the calculations in the CF worksheet.
Although the CF worksheet assumes annual uneven cash flows, you can shoe-horn in non-annual cash flows, but ya hafta set it up right and ya gotta be careful how to interpret the results!!!