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Using Texas Instruments BA II Plus Calculator?

KBaltazarKBaltazar Los AngelesPosts: 8 Associate
edited October 2014 in General CFA Topics
Can someone tell me what buttons to push on my calculator in order to solve this IRR equation because I think I am doing it the long way not utilizing the actual IRR button?


The Japanese company Kageyama Ltd. is considering whether or not to open a new factory to manufacture capacitors used in cell phones. The factory will require an investment of ¥1,000 million. The factory is expected to generate level cash flows of ¥294.8 million per year in each of the next five years. According to information in its financial reports, Kageyama’s opportunity cost of capital for this type of project is 11 percent. 1.
Determine whether the project will benefit Kageyama’s shareholders using the NPV rule. 2.
Determine whether the project will benefit Kageyama’s shareholders using the IRR rule.



NPV=−1,000+294.8[1−(1.11) −5 ]/0.11 NPV=−1,000+1,089.55=89.55   
 


Because the project’s NPV is positive ¥89.55 million, it should benefit Kageyama’s shareholders. 
Solution to 2: 

The IRR of the project is the solution to 

NPV=−1,000+294.8[1−(1+IRR) −5 ] / IRR=0 


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