The procedures in this document use the following text to represent symbol keys:

The net present value (NPV) function is used to discount all cash flows using an annual nominal interest rate that is supplied.

These steps describe how to calculate NPV:

1. Press SHIFT, then C ALL and store the number of periods per year in P/YR.
2. Enter the cash flows using CFj and Nj.
3. Store the annual nominal interest rate in I/YR, and press SHIFT, then NPV.

The opportunity exists to purchase a contract with the following cash flows:

How much should be paid for the contract so that a yearly yield of 15 percent can be earned on the investment?

I/YR = 15%

The cash flows that describe the prospective investment are now in the calculator. Press RCL, CFj, then 0 followed by RCL, CFj, [+], and RCL, SHIFT, then Nj, repeatedly to view the cash flows and number of times each occurs.

Now that the cash flows have been entered, store the interest rate and calculate the net present value.

This result shows that if a yearly yield of 15 percent is to be earned, then $27,199.92 should be paid for the contract.

1. Press SHIFT, then C ALL; store number or periods per year in P/YR.
2. Enter the cash flows using CFj and Nj.
3. Press SHIFT, then IRR/YR.

When IRR/YR is calculated, the annual nominal rate that gives the NPV of zero appears.

More than one IRR/YR can exist. If the calculator displays NO SOLUTION, there is no answer. This situation might be the result of an error, such as a mistake in keying in the cash flows. A common mistake that results in this message is putting the wrong sign on a cash flow. A valid cash-flow series for an IRR/YR calculation must have at least one positive and one negative cash flow.

If the seller of the contract in the previous example wants $28,000 and that price is accepted, what is the yield? This is an IRR/YR calculation that requires a slight modification to the currently stored cash flows.