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 Subject: Finance Category: Business and Money > Finance Asked by: baseball2-ga List Price: \$5.00 Posted: 25 Jul 2005 16:20 PDT Expires: 24 Aug 2005 16:20 PDT Question ID: 547812
 ```What am I doing wrong? I am trying to figure NPV with an opportunity cost of capital at 12%. Project flows for year one is 28,500, year two is 22,500, year three is 16,500 and year four is a -500.00. I am using the following formula: 28,500/1.12 + 22,500/ (1.12)^2 + 16,500/ (1.12)^3 + -500/ (1.12)^ 4 My calculator is telling me syntax error. Can I not plug in a negative number? Sorry, I am really ignorant with this stuff. Any help would be greatly appreciated. Thanks.```
 ```Baseball2 -- My H-P (it's an old model) will take the negative numbers -- and indeed you should show outward cashflow for year 4 with these assumptions. Here are the NPV factors: Year 1: 1.1200 Year 2: 1.2544 Year 3: 1.4049 Year 4: 1.5735 So the year 4 cash flow, discounted is -500/1.5735 = -317.76 Let me know if there are any other problems in calculating this NPV. Best regards, Omnivorous-GA``` Request for Answer Clarification by baseball2-ga on 25 Jul 2005 17:09 PDT ```I am sorry, I am still a bit cofused. Are you stating to calculate the NPV I should use 28,500/1.2 + 22,500/(1.254)^2 + 16500/ (1.4049)^3 + -500/ (1.573^4? Or do I keep the ^ (roots) out? You don't have to answer the next question if you would like me to submit it seperatly. But I also need to figure out the IRR, what would be the calculation or formula to do that? Thanks much, and I truly appreciate all your help.``` Clarification of Answer by omnivorous-ga on 25 Jul 2005 17:22 PDT ```Baseball2 -- No -- your calculations as orginally presented are correct. I've simply done the math so that you can check your denominator against those numbers . . . Again, you're calculating the NPV correctly! Note that if you're having troubles with your calculator, simply run the numbers, then hit "CHS" or "Change Sign" on the calculator when you know the cash flow is negative. Now, to get the IRR, you want a discount factor that reduces the NPV to zero. I find that it's easiest to set up a line with the discount factor and change the numbers. Here's an example, where 9% interest produces a positive NPV but 14% produces a negative NPV. The line "IRR test" adjusts the discount rate until we get a value closest to zero (the closest we could get was -\$129, as 11.9% produced a positive NPV and 12.1% was a much bigger negative number): http://www.mooneyevents.com/npvirr.xls Best regards, Omnivorous-GA```
 baseball2-ga rated this answer: `I get it now. Sorry for the confusion and thank you very much!`