Finance Calculators: Tips and Tricks with the Cash Flow Operation

This applies to any calculator that has the time value of money (TMV) and net present value (NPV) function.

Net Present Value Formula

NPV = Σ ( pmt_k ÷ (1 + rate/100)^k for k = 0 to n )

pmt_k: payment for each period k
rate: the periodic rate

Breaking Cash Flow Groups

A lot of financial calculators (Texas Instruments BA II Plus, BA II Plus Professional, HP 10 bII+, HP 17bii+) allow for a cash flow to have a frequency greater than 99 (to most likely higher limit of 999). However, the popular HP 12C and older financial calculators allows a frequency limit of 99.

This comes into play when finding the net present value of payments of a pension and retirement plans.

For example:

Evaluate a pension factor of the following payment structure:

Initial Cash Flow: 0
Cash Flow Set 1: 1 for 120 flows
Cash Flow Set 2: 0.9 for 180 flows
Cash Flow Set 3: 0.8 for 180 flows

Periodic Rate: 0.45%

Cash Flow Setup:
CF0 = 0
CF1 = 1; FRQ1 = 120
CF2 = 0.9; FRQ2 = 180
CF3 = 0.8; FRQ3 = 180

Calculated NPV = 182.88

Here is the same problem with breaking large groups into smaller ones. Let's say 99 is the frequency limit. Hence: 120 = 99 + 21 and 180 = 99 + 81. So here it is with the large cash flow frequencies split. This can be used with the HP 12C.

Periodic Rate: 0.45%

Cash Flow Setup:
CF0 = 0
CF1 = 1; FRQ1 = 99
CF2 = 1; FRQ2 = 21
CF3 = 0.9; FRQ3 = 99
CF4 = 0.9; FRQ4 = 81
CF5 = 0.8; FRQ5 = 99
CF6 = 0.8; FRQ6 = 81

Calculated NPV = 182.88

Net Future Value (NFV) and Net Utility Stream (NUS)

Some advanced financial calculators have the net future value (NFV) and net utility stream (NUS) functions. But this section will show how to calculate NFV and NUS using the NPV and TVM functions.

Steps:
1. Enter the cash flows and periodic interest rate.
2. Calculate NPV. Store this amount in memory as needed.
3. Set up the TVM variables as such:

For calculating NFV:
P/YR (payments per year) = 1
N = total number of cash flows
I = periodic interest rate
PV = -NPV (enter the NPV then press the change sign)
PMT = 0
Compute FV. (that is the NFV)

For calculating NUS:
P/YR (payments per year) = 1
N = total number of cash flows
I = periodic interest rate
PV = -NPV (enter the NPV then press the change sign)
FV = 0
Compute PMT (that is the NUS).


Let's go through a couple of examples:

Example 1:

Periodic Rate: 5%
Initial Cash Flow: -1000 (Flow 0)
Cash Flow 1: 100
Cash Flow 2: 250
Cash Flow 3: 500
Cash Flow 4: 750
Cash Flow 5: 500

NPV = 762.70

Computing NFV:
P/YR = 1
N = 5
I = 5
PV = -762.70
PMT = 0
Compute FV: 973.43 (NFV = 973.43)

Computing NUS:
P/YR = 1
N = 5
I = 5
PV = -762.70
FV = 0
Compute PMT: 176.16 (NUS = 176.16)

Example 2:

Periodic Rate: 4.75%
Initial Cash Flow: -1000 (Flow 0)
Cash Flow 1: 200
Cash Flow 2: -500
Cash Flow 3: 500
Cash Flow 4: -100
Cash Flow 5: 800
Cash Flow 6: 1000

NPV = 478.51

Computing NFV:
P/YR = 1
N = 6
I = 4.75
PV = -478.51
PMT = 0
Compute FV: 632.14 (NFV = 632.14)

Computing NUS:
P/YR = 1
N = 6
I = 4.75
PV = -478.51
FV = 0
Compute PMT: 93.52 (NUS = 93.52)

Hopefully this helps. Have a great day and I will talk to you next time!

Eddie


This blog is property of Edward Shore. 2014

BA II Plus Professional: Silver (2004) vs Black (2013) Keyboard

First of all, I have to give a shoutout to Office Depot, who matched the price they had for the BA II Plus Professional on their website ($49.99) instead of the store price ($57.99).

Today's blog entry is about the BA II Plus Professional which is the deluxe version of the long time running BA II Plus. Like the "base" model, the BA II Plus Professional operates the same way: other than the standard Time Value of Money worksheet (TVM), you scroll through the options and calculations through each worksheet by using the up and down arrows.

What does the BA II Plus Professional have above the BA II Plus?

* The number of cash flows that can be entered is increased from 24 to 32
* The cash flow worksheet has additional calculations: net future value, payback, discounted payback.
* Modified internal rate of return is added.
* Modified duration of bonds is added.

Both have (to name a few):
* Trigonometric functions
* Chain or AOS mode (post-fix)
* Depreciation: Straight Line, Sum of Years' Digits, Declining Balance, Declining Balance with Crossover (good for taxes)
* Four Regressions for Statistics: Linear, Logarithmic, Exponential, Power (standard)
* Breakeven, Date Calculations (until 2049... ugh).
* Interest Conversion, Percent Change, and Amortization

Truthfully, both models have plenty to offer.

Let's talk about keyboards The keyboard on the silver BA II Plus Professional is awful, at least on the one I have. The buttons are very hard to press, and even with hard presses keys do not register. At various angles the 2nd functions, which are light gray fade perfectly into the silver plate, making them not invisible.

The current black keyboard is miles ahead of the original keyboard. First of all. The printing of the 2nd functions, which are now in medium gray, are visible against the black plate. Second, the keys respond well and you don't need hammers as fingers to get the keys to register.

Displays are different. The black keyboard has a larger display. You can see the difference below.

Do I recommend the BA II Plus or the BA II Plus Professional? Truthfully it depends on needs (or wants) since there is a price difference between the two. Should you decide to get the BA II Plus Professional, I highly recommend that you get try current black keyboard.

By the way, Texas Instruments also redesigned the BA II Plus. The current keyboard is slight shorter and the keys are slightly bunched together. However, like the new BA II Professional, the display is bigger.

Let me know what you think in the comments. Maybe I should do a comparison between BA II Plus Professional vs HP 10bII+ or 12c Platinum? As always, thank you for your support and see you next time!


Eddie


This blog is property of Edward Shore. 2014

Random Calculator Thoughts: New Design of the BA II Plus, Names of Calculators, Calculator Apps allowed on Tests in Texas

Texas Instruments:  New Design of the BA II Plus and BA II Plus Professional

Recently, Texas Instruments released a new design of their financial calculators, the BA II Plus (http://education.ti.com/en/us/products/calculators/financial-calculators/baii-plus/features/features-summary) and the BA II Plus Professional (http://education.ti.com/en/us/products/calculators/financial-calculators/baii-plus-professional/features/features-summary).

*  The display of the new BA II Plus and the Professional show larger digits and time-value-of-money indicators.
*  I first purchased a BA II Plus Professional when it was first released in 2004.  The original had a silver, metallic design with silver keys.  The keys on the one I had were really hard to press, making the calculator incredibly hard to use.   The keyboard certainly did not allow for long periods of use.  I am really hoping the new black design has a much better keyboard.
*  At first glance, the black design of the BA II Plus professional looked like a calculator that was specialized for the auto mechanic, not for the finance professional.  It still looks good, and better than the original silver design in my opinion.
 * I don't own either calculators in the new design, but I plan to get the BA II Professional when I can.  If you do, please leave a comment.


The Names of Calculator Series

* Texas Instruments and Casio both like to keep the model numbers of their calculators the same.  This is both good and bad.  The good is that keeping the same number shows that the calculator, even with the new features, keeps the same lineage so going to the new version is easier.  The bad is that if there are so many versions, it is hard to tell which one to shop for, either online or in the store.  Bottom line, research and note the exact model name that you want.
*  Here are a few examples of such calculator lines:

TI-30 (Texas Instruments)

The Original TI-30 was released in 1976.  Jumping to today:

TI-30xa: basic battery powered model with the old-school post-fix entry

TI-30x Solar, known as the TI-30 ECO RS outside of the United States:  the solar version of the TI-30xa.   Unfortunately, Texas Instruments stopped selling the 30x Solar model in the United States.

TI-30 X II:  Two line calculator - now comes in a rainbow of colors.  I have a light blue one I got from Target several years ago.  The TI-30 XII gets linear regression and five storage registers.  Want a battery powered 30XII?  Shop outside the United States.

TI-30 X Multiview: Over the 30 XII, the Multiview gets the ability to input equations in textbook fashion and a function table.

TI-30X Pro/TI-36X Pro:  Both are the same.  In the United States, this is called the TI-36X Pro.  Outside the USA, it is called the TI 30X-Pro.  This is the top of the line in this line and the 36X Pro is one of my favorite calculators of all time.  Over the 30XII Multiview, we get calculus functions (integrals, derivatives, summations), an equation solver, Boolean algebra, matrices, vectors, and conversions.  

TI-83/84 (Texas Instruments - their flagship graphing calculator)

TI-83 - without apps
TI-83 Plus
TI-83 Plus Silver Edition
TI-84 Plus
TI-84 Plus Silver Edition
TI-84 Plus C Silver Edition (this is the color graphing calculator)

Casio fx-115/fx-991 Series

Depending on where you live, these calculators are either called the fx-115 or the fx-991.  Several years back I did a review of the fx-115 ES Plus calculator where I talk about the newer features such of integer division, GCD, and LCM.  It turns out that that the fx-991 ES Plus did not have the new features I mentioned, which was brought up in the comments (thanks! :) ).  The international equivalent of the fx-115 ES Plus is the fx-991 EX Plus C, though I am not sure if the fx-991 ES Plus C is even available anymore.  Although the equivlaent for Japan is the fx-995 ES.  

Link the fx-995 ES - translated into English by Google Translate

 The fx-991 ES Plus which is still on sale according to the World Wide Casio website, by looking at the keyboard, the fx-991 ES Plus only has one more thing than the fx-115 ES, a random integer function.  
 
Casio fx-3650p and fx-50f (Plus)

The fx-3650p and fx-50f are solar programmable calculators.  The fx-50f has the added bonus an equation library.    Despite the fact that the programming language on both of these calculators are simplified, it adds a powerful dimension.  It it also encourages students to learn programming to solve various mathematical problems.  

Why are the fx-3650p and fx-50f not sold in the United States?  Drives me nuts!  I have a fx-3650p which ordered from a store in Hong Kong several years.   

Here are links to the Casio world-wide site:
fx-3650p:  http://edu.casio.com/products/program/fx3650p/
fx-50f Plus: http://edu.casio.com/products/program/fx50fp/

Apparently, there are now several varieties of the fx-50f.

Calculator Apps in the Classroom

I believe it is inevitable that calculator apps will become part of the norm in the classroom.  For comparison purposes, fifteen to twenty years ago, a lot of teachers shivered at the thought of allowing graphing calculators into the classroom.   Today, go to any math classroom (middle school, high school, or college), and the majority of the students will have a graphing calculator. Please correct me if I am wrong, but I think that the standardized tests of high school students have parts that require graphing calculators. 

The reason why I am coming to the conclusion is because of an article I recently read.  Texas Commissioner of Education Michael Williams has decided to allow districts to use either a handheld graphing calculator or a graphing calculator app for the 8th grade mathematics portion of the STAAR (State of Texas Assessment of Academic Readiness).  The article states that it is the first time a graphing calculator app is allowed on a standardized test.  This a pilot program that will be used for the 2014-2015 academic school year.  I expect that graphing calculator apps will be fully accepted after the pilot program.  Note that smart phones are not still allowed.  

Wow... 8th graders have smart phones - shows how old I am.  

Here is a link to the article from the KLTV news site, one of the various news sources reporting on this:  http://www.kltv.com/story/25031254/tea-authorizes-use-of-calculator-app-for-14-15-staar-math-test.


That wraps up this blog entry - please let me your thoughts and comments.  As always they are much appreciated.  I'll talk to you next time!

Eddie



This blog is property of Edward Shore.  2014