Can anyone tell me which calculator could solve hw4.1 d&e?  Thanks.

 

You can answer these by using the Cash-Flow functionality of a financial calculator. I'll describe how to do so using the TI BAII Plus (similar steps will be used on other financial calculators).

Press the CF button on the BAII Plus. Set the cash-flows as

CFo = -400 (initial cash-flow)
C01 = 220 (first cash-flow)
F01 = 1 (number of times it occurs)
C02 = 310 (second unique cash-flow)
F02 = 1 (number of times it occurs)

Note: you can use the F** variable to deal with repeated values: e.g. cash-flows -400, 220, 220, 310 would only require you to change F01 to 2 rather than inserting a third cash-flow between the first and the second.

To set each of these values type

400- ENTER DOWN 220 ENTER DOWN 1 ENTER DOWN 310 ENTER DOWN 1 ENTER DOWN

Make sure that you delete any other cash flows (C03, C04, etc) by pressing DEL on any extra cash-flow stored from a previous calculation. Then press

IRR CPT

to compute the internal rate of return.

Note: you can also calculate net present values using the cash-flow functionality. Enter the cash-flows as before, then press the NPV button. Enter the interest rate, 10% say, then press CPT:

I = 10
NPV = CPT

Do this with the following keystrokes (after you've pressed the NPV button):

10 ENTER DOWN CPT

I did the homework, but I have no idea if my answers are right. Can anyone compare their results with me? Thanks!

Ex 4.1
(a) 37.47 (b) 44.04 (c) project #2 (d) 19.73% (e) 18.68% (f) project #1

Ex 4.2
(a) 50 (b) 44 (c) project #1 (d) 16.65% (e) 18.69% (f) project #2

Gordon

For G, do we need further explanations than the following?

The NPV and IRR methods give different recommendations because they have different assumptions about unused cash. The NPV rule assumes that unused cash earns the opportunity cost of capital; the IRR rule assumes that unused cash earns the internal rate of return.