Tag: investment
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The Modified Internal Rate of Return
Using the IRR has been a much-used tool for evaluating potential investments. This is most likely due to the simplicity of using it. Yet, the IRR has some flaws, the most crucial one being that it assumes the cash flows will be reinvested for the life of the project at the rate which equals the…
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Obtaining the Net Present Value (NPV)
Calculating the (NPV), or the Internal Rate of Return (IRR) is about the same to finding the present value of an uneven cash-flow. This is what was covered in Present Value of Uneven Cash-Flow. As you may recall a investment opportunity came your way which was: Let’s say you have the opportunity for an investment…
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The Present Value of Uneven Cash Flow
To be able to work these problems I must first introduce you to another key on the Texas Instrument BA II Plus calculator. The key is on the second row and is the second one from the left. It is CF, the cash flow key. It’s used to handle uneven cash flows. When you’ve solved…
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Present Value of Tomorrow’s Lump Sum
It is useful to be able to calculate the present value of tomorrows’ lump sum because it is used in the process of discounting future cash into present value. As an example, let’s assume you the investor has been offered the opportunity that is projected to provide a $2,552.56 cash in flow at the end…
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