Using the HP12c for NPV and IRR Calculations

I never knew how to do this before, but to calculate the NPV of a stream of cash flows on the HP12c, you enter each cash flow in a sequence.  This is actually really cool and useful and I think it might help in some interviews going forward.  Suppose you had cash flows as follows and a 12% discount rate:

T0  -3,000

T1  No cash flow

T2  +400

T3  +800

T4  +1,500

T5  +2,000

You enter in -3,000 [3,000, enter, chs] and then press the blue g key and then the PV button (note that on the PV button, the blue text is CF0, for cash flow zero).  This is now in the calculator.  Next, enter in all sequential cash flows using the same idea but for the PMT key.  For T1, go [0 enter, blue g key, PMT key].  Note that the blue text on the PMT key says CFj, for cash flow j.  Enter in all additional cash flows in order.  Then enter a discount rate into i [12 enter i].  Finally, press the orange f (function) key and press NPV to calculate the NPV.  Here I come to an NPV of -23.567, which I confirmed with a quick excel sheet.

Note now that you can also input a PV and solve for IRR.  Using the same numbers, lets now input a PV of zero [0, enter, PV].  Now to solve for the IRR, hit [f, FV] - the orange writing on the FV button is IRR.  In the example above I come to 11.778%, which makes sense - our discount rate is 12% and the IRR is just a bit lower than that, so we should reject the project.  This also makes sense with our project's overall slightly negative NPV.

This is really useful for solving money-weighted rates of return for portfolios.

Note: It is always a good idea to hit [f, x><y] (clear FIN) on you calculator before beginning a calculation - this clears the bank of financial buttons so you have a clean start each time.