The net present vale (NPV) function on the BA II Plus Financial Calculator finds the present value of a stream of cash flows. While the time value of money keys can find the present value of a lump sum payment or stream of cash flows that does not change over the whole investment horizon, the *NPV function does even more*. It can make the same present value calculations as the time value of money functions, but also finds the present value of a stream cash flows that change over the investment horizon.

## Calculating NPV

## Step 1: Enter the cash flows.

Open the cash flow worksheet (CF) and enter each cash flow and its frequency. For example, an investment yielding $100 in year one, $200 in year two, and $300 in year three would be entered as:

CF0=0, C01=100, F01=1, C02=200, F02=1, C03=300, F03=1

## Step 2: Enter the discount rate.

Press the NPV button. When the display shows *I* for the interest rate, provide the appropriate discount rate and push the enter button. For example, enter I=7 for a 7% discount rate.

## Step 3: Compute NPV.

Do not exit the NPV function but instead press the down arrow key at the top of the calculator so the display shows NPV. Press the CPT button, and the calculator should return the solution. Using the example above, NPV=$513.04.