Owner's Manual

Table Of Contents
To Press Display
Sum to memory. D H
1
6,010.52
Enter 4th cash flow.
10000 S 0
FV= -10,000.001
Enter period number.
4 ,
N= 4.001
Compute present value of 4th
cash flow.
C .
PV= 6,830.137
Sum to memory. D H
1
6,830.13
Recall total present value. J
1
23,171.23
Subtract original cost. B
23000 N
171.23
Answer: The present value of the cash flows is $23,171.23, which exceeds the
machines cost by $171.23. This is a profitable investment.
Note: Although variable cash flow payments are not equal (unlike annuity
payments), you can solve for the present value by treating the cash flows as a
series of compound interest payments.
The present value of variable cash flows is the value of cash flows occurring at
the end of each payment period discounted back to the beginning of the first
cash flow period (time
Example: Computing Present Value of a Lease With
Residual Value
The Peach Bright Company wants to purchase a machine currently leased
from your company. You offer to sell it for the present value of the lease
discounted at an annual interest rate of 22% compounded monthly. The
machine has a residual value of $6500 with 46 monthly payments of $1200
remaining on the lease. If the payments are due at the beginning of each
month, how much should you charge for the machine?
Time-Value-of-Money and Amortization Worksheets 33