CFA Level 1 Net Present Value Calculation

Net Present Value of Annual Cash Flows at 10%

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Question

What is the Net Present Value of this series of annual cash flows at an interest rate of 10% per year: Year 0: <$25,000>, Year 1: $2,000, Year 2: $0, Year 3:

$15,000, Year 4 $0, Year 5 $18,000? (Note that the <> are used to indicate a negative number).

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Explanations

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A

On the BAII Plus, press CF 2nd CLRWork 25000 +/- ENTER DownArrow 2000 ENTER DownArrow DownArrow 0 ENTER DownArrow DownArrow 15000 ENTER

DownArrow DownArrow 0 ENTERDownArrow DownArrow 18000 ENTER DownArrow DownArrow 2nd Quit. Then press NPV 10 ENTER DownArrow CPT. On the

HP12C, press these keys: 25000 CHS BlueShift CFo 2000 BlueShift CFj 0 BlueShift CFj 15000 BlueShift CFj 0 BlueShift CFj 18000 BlueShift CFj. Then press 10 i, YellowShift NPV. The "DownArrow" represents the downward-pointing arrow on the top row of the BAII Plus keyboard. Make sure the BAII Plus has the P/Y value set to 1.