Introduction to Finance

For HP 10 B II Financial Calculator, enter the following data:
–20,000 CF
j
5800 CF
j
5800 CF
j
5800 CF
j
5800 CF
j
5800 CF
j
Pushing the IRR key (for some calculators, you may need to push a shift, or “2
nd
,” key before 
pushing the IRR key). Doing so, we fi nd the IRR is 13.82 percent.
internal rate of return (IRR) 
method 
return that causes the net 
present value to be zero
9
This method also is used to fi nd the yield to maturity on bonds in Chapter 10.
0.0 0.01 0.02 0.03 0.04 0.05 0.06 0.07 0.08 0.09 0.10 0.11 0.12 0.13 0.14 0.15 0.16 0.17
NPV ($)
–2,000.00
Discount rate (in decimal)
0.00
2,000.00
4,000.00
6,000.00
8,000.00
10,000.00
FIGURE 17.1
 Relationship 
Between NPV and Discount 
Rates

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532
C H A PT E R 1 7 Capital Budgeting Analysis
For the TI BA II Plus Financial Calculator, enter the following data:
To
Press
Display
Select Cash Flow worksheet. 
CF
CFo = 0.00
Enter initial cash flow. 
20000 +/– ENTER
CFo = –20,000
Enter cash flow for first year.
↓ 
5800
ENTER
C01 = 5,800
↓
F01 = 1.00
Enter cash flows for the second year
↓ 
5800
ENTER
C01 = 5,800
↓
F01 = 1.00
Enter cash flows for the third year
↓ 
5800
ENTER
C01 = 5,800
↓
F01 = 1.00
Enter cash flows for the fourth year
↓ 
5800
ENTER
C01 = 5,800
↓