**Net Present Value (NPV)** is a concept used often in finance as a way to calculate the value of an asset based on the future stream of cash flows it generates. A NPV calculation can be long and difficult, but the TI-83 Plus includes a function that performs the calculation. You simply need to input the correct data into the formula.

The formula for NPV in the TI-83 is:

NPV( Rate, Initial Outlay, {Cash Flows}, {Cash Flow Counts})

Rate is the interest rate used to discount the cash flows, initial outlay is the amount paid at time 0, cash flows and cash flow counts specify the dollar amount of the cash flows each period and the frequency of the cash flow. If cash flow counts are not specified, the formula assumes that each cash flow occurs a single time.

## Example

Consider an investment opportunity that requires a cash outflow of $400 today but will generate cash flows for the next four years. You will receive $100 in the first year, $200 in the second and third years, and $300 in the fourth year. If your required rate of return on the investment is 10 percent, what is the value (NPV) of this investment today?

## Step 1

Access the NPV function by choosing the apps menu and the finance option. NPV is number 7 in the finance functions.

## Step 2

Enter the information into the NPV formula. Enter 10 for the rate. Enter -400 for the initial cash outlay. Enter 100, 200, 300 for the cash flows. Enter 1,2,1 for the cash flow frequency.

*Note: Alternatively, you can enter 100,200,200,300 for the cash flows and leave the cash flow frequency input blank.*

## Step 3

Press ENTER to calculate NPV. The calculator should show NPV = 211.265. This indicates that the investment value today is $211.27.