Sharp El738 User Guide
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40 Procedure Key operation Display Change the fi rst cash fl ow value from –25,000 to –30,000., 30000 J CF D—= -3000000 Change the frequency of 5000 from 2 to 1.i i i i i i i 1 JCF N3= 100 Add a new data set (6000) immediately before 5000.. e 6000 JCF D3= 600000 To confi rm the corrections, press . z to jump to the fi rst data item and press i to browse through each data item. Variables used in discounted cash fl ow analysis Variable Description Default value RATE (I/Y) Internal rate of return (IRR) 0 NET_PV Net present value (NPV) — • The variable RATE (I/Y) is shared by the variable I/Y. NET_PV is for calculation only and has no default value. • The BGN/END setting is not available for discounted cash fl ow analysis. NPV and IRR The calculator solves the following cash fl ow values: Net present value (NPV): The total present value of all cash fl ows, including cash paid out (outfl ows) and cash received (infl ows). A profi table investment is indicated by a positive NPV value. Internal rate of return (IRR): The interest rate that gives a net present value of zero. Basic operations Refer to page 19 for basic variable operations. 1. Press s to clear the display. • Make sure the calculator is in NORMAL mode. JOBODJBMVODUJPOT$VSSFOUJOEEJOBODJBMVODUJPOT$VSSFOUJOEE1.1.
41 2. Enter cash fl ow data. • Refer to page 37 for instructions on entering cash fl ow data. 3. Press . < to begin discounted cash fl ow analysis. • If a previously entered cash fl ow value is displayed, press s to exit and then press .
42 Procedure Key operation Display Enter cash fl ow data. , 12000 J DATA SET:CF 000 3000 JDATA SET:CF 100 5000 > 3 JDATA SET:CF 200 4000 JDATA SET:CF 300 Return to the initial dis- play in NORMAL mode.s 000 If there is cash fl ow data stored, press > . b to clear it. 2. Calculate IRR. Procedure Key operation Display Select discounted cash fl ow analysis, and set all the variables to default values. . < . b RATE(I/Y)= 000 Calculate IRR (RATE (I/Y)). @RATE(I/Y)= 2314 Answer: The net present value of the cash fl ows equals zero at an IRR of 23.14%. Calculating the present value of variable cash fl ows Your company has prepared forecasts for the development costs and operating profi ts of the next generation of your product. Development costs for each of the next three years (Years 1 to 3) will be $50,000. Manufacturing equipment costing $100,000 will be purchased at the end of Year 3. Annual profi ts for the fi ve-year product life (from Year 4 to Year 8) are projected to be $80,000. The salvage value of the manufacturing equipment at the end of Year 8 is $20,000. Given a 12% discount rate, should your company proceed with the product development? *1 2 JOBODJBMVODUJPOT$VSSFOUJOEEJOBODJBMVODUJPOT$VSSFOUJOEE1.1.
43 $80,000 $80,000 $80,000 $80,000 $80,000 –$20,000 –$50,000 –$50,000 –$100,000 –$50,000 1. Enter the cash fl ow data. Procedure Key operation Display Bring up the initial dis- play in NORMAL mode.s 000 Enter cash fl ow data. , 50000 > 2 JDATA SET:CF 000 , 150000 JDATA SET:CF 100 80000 > 4 JDATA SET:CF 200 60000 JDATA SET:CF 300 Return to the initial dis- play in NORMAL mode.s 000 If there is cash fl ow data stored, press > . b to clear it. 2. Calculate NPV. Procedure Key operation Display Select discounted cash fl ow analysis, and set all the variables to default values. . < . b RATE(I/Y)= 000 Enter the discount rate.12 QRATE(I/Y)= 1200 Calculate NPV (NET_PV).i @NET_PV= 662752 Answer: As NPV = 6,627.52 > 0, the product can be developed. *1 *1 JOBODJBMVODUJPOT$VSSFOUJOEEJOBODJBMVODUJPOT$VSSFOUJOEE1.1.
44 Bond Calculations Using bond calculations, you can obtain bond prices, yields to maturity, and accrued interest. Variables used in bond calculations Variable Description Default value COUPON (PMT) Annual coupon rate (%) 0 REDEMPT (FV) Redemption value 0 M-D-Y 1 Settlement date (date of bond pur- chase)1-1-2001 M-D-Y 2 Redemption date 1-1-2001 CPN/Y (N) Number of coupons per year 1 YIELD (I/Y) Yield to maturity (%) 0 PRICE (PV) Bond price 0 ACCU INT Accrued interest — Redemption value of the security per $100 par value. You can change the date format to D-M-Y (see page 10). You can only enter “1” or “2” — “1” for annual coupons and “2” for semi-annual coupons. Per $100 par value. Note: Bonds are associated with payment methods known as coupons. A coupon is like an “interest-only payment,” and it is based on the future value of the bond. COUPON is a percentage of the bond par value, usually annually, by the owner of the bond. For bonds that have annual coupons, the owner receives one payment of the coupon amount each year. Some bonds have semi-annual coupons. For these, each year’s coupon amount is paid in two equal payments six months apart. The date on which a coupon payment is made is called the “coupon date.” The bond maturity date is usu- ally the last coupon date. Setting the day-count method You can toggle between the actual calendar (365 days plus leap years) and a 360-day calendar (12 months of 30 days each) using . &. The actual calendar is set by default (360 is not displayed). The calendar range is from January 1, 1901 to December 31, 2099. *2 *2 *1 *2 *1 *3 *4 *3 *4 JOBODJBMVODUJPOT$VSSFOUJOEEJOBODJBMVODUJPOT$VSSFOUJOEE1.1.
45 Basic operations Refer to page 19 for basic variable operations. 1. Press s to clear the display. • Make sure the calculator is in NORMAL mode. 2. Select bond calculations by pressing #. • To end bond calculations, press s. • If you press s during entry, any entered values will be cleared. 3. Change the day-count setting, if necessary, by pressing . &. 4. Enter the coupon rate (%) into COUPON (PMT) by entering the value and pressing Q. 5. Enter the redemption value into REDEMPT (FV) by pressing i, entering the value, and pressing Q. 6. Enter the date of bond purchase into M-D-Y 1 (or D-M-Y 1) by pressing i, entering the date, and pressing Q. • For date entry, refer to page 47, ”Entering dates”. 7. Enter the redemption date into M-D-Y 2 (or D-M-Y 2) by pressing i, entering the date, and pressing Q. • For date entry, refer to page 47, ”Entering dates”. 8. Enter the number of coupon payments per year into CPN/Y (N) by pressing i, entering the value, and pressing Q. 9. To fi nd bond price or yield to maturity, do the following: To obtain bond price (PRICE (PV)): Enter annual yield (%) into YIELD(I/Y) by pressing i, enter- ing the value, and pressing Q. Move to PRICE (PV) and calculate by pressing i and @. Display the accrued interest (ACCU INT) by pressing i. The accrued interest is calculated automatically. To obtain yield to maturity (YIELD (I/Y)): Move to PRICE (PV) and enter the bond price by pressing i i, entering the value, and pressing Q. Move to annual yield, YIELD (I/Y) and calculate by pressing z @. Display the accrued interest (ACCU INT) by pressing i i. The accrued interest is calculated automatically. COUPON(PMT)= 000 JOBODJBMVODUJPOT$VSSFOUJOEEJOBODJBMVODUJPOT$VSSFOUJOEE1.1.
46 Calculating bond price and accrued interest A $100, 20-year, 6.5% coupon bond is issued to mature on August 15, 2023. It was sold on November 3, 2006 to yield the purchaser 7.2% compounded semiannually until maturity. At what price did the bond sell? Also calculate the accrued coupon interest. Procedure Key operation Display Bring up the initial dis- play in NORMAL mode.s 000 Select bond calcula- tions.#COUPON(PMT)= 000 Make sure the actual calendar is set (360 is not displayed). Enter the coupon rate (%).6.5 Q COUPON(PMT)= 650 Enter the redemption value.i 100 QREDEMPT(FV)= 10000 Enter the settlement date.i 11032006 QM-D-Y 1=[FR] 11- 3-2006 Enter the redemption date.i 08152023 QM-D-Y 2=[TU] 8-15-2023 Enter the number of coupon payments per year.i 2 QCPN/Y(N)= 200 Enter the annual yield (%).i 7.2 QYIELD(I/Y)= 720 Calculate bond price. i @PRICE(PV)= 9323 Calculate the accrued interest.iACCU INT= 141 Calculate bond price including accrued interest.s i v + i / =PV+ANS= 9464 Answer: The bond sold at $93.23 and the accrued coupon interest was $1.41 (the bond price including accrued interest would be $94.64). The asking price on the above bond is $92.50. What will your yield be? JOBODJBMVODUJPOT$VSSFOUJOEEJOBODJBMVODUJPOT$VSSFOUJOEE1.1.
47 Procedure Key operation Display Change the bond price to $92.50.# i i i i i i 92.5 Q PRICE(PV)= 9250 Calculate the yield. z @YIELD(I/Y)= 728 Answer: The yield will be 7.28%. Entering dates Refer to the following notes for date entry. • Enter using US date format (MM-DD-YYYY) or EU date for- mat (DD-MM-YYYY). Refer to the previous example and the following explanation. Month entry Enter two digits. From 2 to 9, the preceding zero may be omitted. Day entry Enter two digits. From 4 to 9, the preceding zero may be omitted. Year entry Enter four digits. From 2010 to 2099, the zero following the fi rst “2” may be omitted. From 1901 to 1989, the “9” following the fi rst “1” may be omitted. • After entry, the date will be stored and the abbreviated day of the week will be displayed. • [SU]: Sunday, [MO]: Monday, [TU]: Tuesday, [WE]: Wednes- day, [TH]: Thursday, [FR]: Friday, [SA]: Saturday. • The default value for dates is: January 1, 2001 (1-1-2001). • The effective range of dates is: January 1, 1901 to December 31, 2099. • If an inappropriate date is entered (e.g., February 31), an error message (Error 7) will appear immediately after pressing Q. In this case, follow either of the following procedures: • Press s to return to the display before the entry, enter the appropriate date, and press Q. • Press g/ y to go back to the display that was shown before you pressed Q. Press s or L, enter the appropriate date, and press Q again. • If you wish to correct numbers during entry, use L as a backspace key. JOBODJBMVODUJPOT$VSSFOUJOEEJOBODJBMVODUJPOT$VSSFOUJOEE1.1.
48 Depreciation Calculations Using depreciation calculations, you can obtain depreciation base values using three types of calculation methods: the straight-line method, the sum-of-the-years’ digits method, and the declining balance method. Variables used in depreciation calculations Variable Description Default value DB (I/Y) Interest per year 0 LIFE (N) Years of depreciation 1 START MONTH Starting month 1 COST (PV) Cost of asset 0 SALVAGE (FV) Salvage value 0 YEAR Year for calculating depreciation value1 DEPRECIATE Depreciation value of above year — RBV Remaining book value — RDV Remaining depreciation value — DB (I/Y) appears only when you select DB (declining balance method) for the depreciation method. Setting the depreciation method • Select the depreciation method in the SET UP menu. It is initially set to SL. Key operation Description ~ 2 0SL (Straight-line method) ~ 2 1SYD (Sum-of-the-years’ digits method) ~ 2 2DB (Declining balance method) Basic operations Refer to page 19 for basic variable operations. 1. Press s to clear the display. • Make sure the calculator is in NORMAL mode. *1 *1 JOBODJBMVODUJPOT$VSSFOUJOEEJOBODJBMVODUJPOT$VSSFOUJOEE1.1.
49 2. Select the depreciation method (see page 48). 3. Select depreciation calculations by pressing O. • When using the declining balance method, DB (I/Y) ap- pears. Enter the number and press Q. • To end depreciation calculations, press s. If you press s during entry, any entered values will be cleared. 4. Enter the number of years of depreciation into LIFE (N) by pressing i, entering the value, and pressing Q. • When using the straight-line method, the value should be a positive real number, while for the SYD or DB methods, it should be a positive integer. 5. Enter the starting month into START MONTH by pressing i, entering the value, and pressing Q. • You can enter values between 1 and 13. • Generally, it is not necessary to enter a decimal value. However, if you wish to enter, for example, the middle of July, enter 7.5; where the decimal is equal to the number value of the given date divided by the total number of days in the month. 6. Enter the cost of asset into COST (PV) by pressing i, entering the value, and pressing Q. 7. Enter the salvage value into SALVAGE (FV) by pressing i, entering the value, and pressing Q. 8. Enter the year for calculating depreciation value into YEAR by pressing i, entering the value, and pressing Q. • The year for calculating depreciation value is initially 1. Pressing @ increments this number by 1. • This value must be a positive integer. 9. Calculate depreciation for the year by pressing i. 10. Calculate the remaining book value by pressing i. 11. Calculate the remaining depreciation by pressing i. 12. To calculate depreciation value for another year, press z three times to go back to YEAR, enter a value for the new year, and recalculate. SL ---------- JOBODJBMVODUJPOT$VSSFOUJOEEJOBODJBMVODUJPOT$VSSFOUJOEE1.1.