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	Net Present Value and Internal Rate of Return

Activity Overview

In this activity, students deal with cash flow and its present value, which is its worth in today's dollars. They will compare alternative investments by determining their Net Present Value and Internal Rate of Return. They will also determine, when called for, whether it is more profitable to lease or borrow money.

Before the Activity

See the attached PDF file for detailed instructions for this activity

Print page 39 - 41 from the attached PDF file for your class

Activity Downloads:

(file types)

TimeValueMoney_TI83_Act13.pdf

During the Activity

Distribute the pages to the class.

Follow the Activity procedures:

Calculate the Net Present Value (NPV) of an investment

In Accept-Reject decisions, accept those investments having a higher NPV and in comparing mutually exclusive investments, choose the one with the highest NPV

Calculate the Internal Rate of Return (IRR) for an investment, determining the rate at which the project's cash flows have a NPV of zero

Use the IRR on a lease arrangement to compare with the interest on a loan, and then decide whether to lease or borrow money

After the Activity

Review student results:

As a class, discuss questions that appeared to be more challenging

Re-teach concepts as necessary

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