Cash Flows Calculations
The HP-12C calculator provides functions for the two most widely-used methods
of discounted cash flow analysis:
(net present value) and
(internal rate of return). These functions enable you to analyze financial problems involving cash flows (Cash-In or Cash-Out) occurring at regular intervals, but of different values.
The RLM-12 Finance Center implementation has the capacity to store up to 99
different cash flow amounts (CFj) plus the initial investment (CFo). Also, equal
consecutive cash flows can be grouped entering the cash flow amount and the
number of times (up to 99) that it repeats (Nj).
The keys involved in the Discounted Cash Flow Analysis are:
Store the index “ j ” of the current cash flow entry for editing; or the index of
the last cash flow to be consider in the NPV and IRR calculation.
Stores the Interest rate to use by the NPV calculation or keeps the result of
the IRR calculation.
Amount of the initial investment stored in storage register 0. This function
stores the number in the display in the storage register 0 and reset
to 0.
Cash flow “ j “ amount. This function increment
by 1 and stores the
number in the display in the Storage Register “n“.
Number of times the cash flow “ j “ occurs consecutively. By default “Nj” is
1. If a value is entered, it must be a positive integer from 1 up to 99.
Calculates the Net Present Value using the value of
as interest rate per
period of the cash flow entries from 0 to the value of
.
Calculates the Internal Rate of Return of the cash flow entries from 0 to the
value of
and stores the result in register .
As a special feature, the RLM-12 Finance Center has an additional
tool to edit or calculate cash flows of regular and variable periods
length. To show it, expand the calculator pressing the
key and
in the "Options Selection Menu", select the “Cash Flows” option.
Example : Cash Flow NPV & IRR Calculations
A property for rent is for sale at $79,000. It has rent and purchase contract that
gives the following cash flows to the investor:
Year
Cash Flow Amount
Year
Cash Flow Amount
1
$14,000.00
6
$9,100.00
2
$11,000.00
7
$9,000.00
3
$10,000.00
8
$9,000.00
4
$10,000.00
9
$4,500.00
5
$10,000.00
10
$100,000.00
What is the Present Value of the investment at 13.5% rate of return, What is the
Internal Rate of Return of the investment?
Keystrokes
clear
Type”79000”
Description
Clears the Storage Registers.
Stores the initial investment (Cash-Out).
Type”14000”
Stores the 1st cash flow value “CF1” (Cash-In).
Type”11000”
Stores the 2nd cash flow value “CF2” (Cash-In).
Type”10000”
Stores the 3rd cash flow value “CF3” (Cash-In).
Type”3”
Stores the number of repetitions of cash flow “CF3” in “N3”.
Type”9100”
Stores the 4th cash flow value “CF4” (Cash-In).
Type”9000”
Stores the 5th cash flow value “CF5” (Cash-In).
Type”2”
Stores the number of repetitions of cash flow “CF5” in “N5”.
Type”4500”
Stores the 6th cash flow value “CF6” (Cash-In).
Type”100000”
Stores the last cash flow value “CF7” (Cash-In).
Type”13.5”
Key in the rate of return a press “ i ” to enter it.
Calculates the Net Present Value. Result = 907.77
Calculates the Internal Rate of Return. Result = 13.72%
Cash Flow Review & Edit
The cash flow amounts are stored in the Storage Registers, from CFo in register
0 to CFj in register “ j ”, thus they can be viewed or changed using
or
.
Nevertheless, this method allows to work with the first 20 entries only ( STO &
RCL can access up to 20 registers, from 0 to 19).
The general method to access all cash flow entries is to use the number stored in
register
as index “ j ”. In this way to view or change an entry use the following
procedures:
To Review cash flow entries (CFj):
Type the index of the cash flow you want to view (“ j ”) and press
. then press
and the amount of “CFj” will be shown in the display. Be aware that
this function decrease by 1 the content of
after the recall.
To Review cash flow repetition (Nj):
Type the index of the cash flow you want to view (“ j ”) and press
. then press
and the number of ‘CFj’ repeats consecutively will be shown in the
display.
To Change a cash flow entry (CFj):
Type the index of the cash flow you want to change (“ j ”) minus 1 and press .
then type the the new cash flow amount and press
. Be aware that this
function increase
by 1 before storing CFj.
To Change a cash flow repetition (Nj):
Type the index of the cash flow you want to view (“ j ”) and press
.
To view or change the initial investment use
to store a new one.
. then press
to view the amount or
After any of these operations, be sure to restore the value of
to its
original value, that is the total number of cash flow entries, not counting
the initial investment.
Summary:
Type “ j “
Store the index “ j ” of the cash flow in the financial register
“n”.
Recalls and displays the amount of the cash flow “n” (CFj) and
decrement the index in “n” by 1.
Recalls and displays the number of times that the cash flow
“n” (Nj) repeats consecutively.
Increments the index in “n” by 1 and stores the number in the
display in the cash flow “n” (CFj).
Stores the displayed value as the number of times that the
cash flow “n” (Nj) repeats consecutively (integer from 1 to 99).
Recalls and displays the amount of the initial cash flow.
Stores the displayed value as the initial cash flow (CFo) and
reset the index in “n” to 0.
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