Brother International PDP350CJ Owner's Manual - English - Page 390

Function IRR (guess, range) Description Example Internal rate of return of series of irregular payments at regular intervals. It returns the interest rate when you know the initial investment and know you will get regular payments of varying amounts. (NPV finds the initial investment when you know the interest rate.) IRR assumes that the income from the investment is reinvested at the interest rate of internal rate of return and calculates the percentage rate at which the NPV of a series of cash flows is equal to the PV of the initial investment. Not available for use in Addressbook. Guess is the number you guess is approximately the interest rate. Range is the address defining the range for the cash flow table. =IRR(.05,C1:C13)returns 2.82% if rounded to two decimal places. See the example below. Example: Your friend is starting a pizza restaurant and you invest $10,000 initially. He then pays you back varying amounts every month. After 5 months you make an additional investment after 6 months to add more staff to the restaurant for the summer. The spreadsheet below shows the cash flow in the range B1:B12. NPV (interest, range) Net present value, which is the amount of money (in today's dollars) to be spent in the future. To discount a future cash flow, calculate its present value. To discount multiple future cash flows, use net present value to calculate their present values and add them together. Use NPV when you know the interest rate and want to know the initial investment. Use IRR when you know the initial investment and want to calculate the rate. Both NPV and IRR use irregular payments at regular intervals. The future cash flows are figured at a constant interest rate, assuming that payments are made at the end of each period. If there is a down payment at the beginning of period 1, add that amount to the result of the NPV calculation. Not available for use in Addressbook. Interest is the interest rate for the calculation. Range is the cells containing the cash flow information. =NPV(.0625/12,B2:B11) returns 10326.87. See the example below. Example: Suppose you want to send your daughter to design school in the coming year. You know the tuition payments are due in August and November, and she will need living costs every month. If the total expense will be $10,500, how much will you have to set aside now in an interest account paying 6.25 percent to cover the necessary expenses each month? Appendix 363