pv calculation formula

There’s sound logic for using internal rate of return (IRR) in a real estate analysis: It considers the aspect of time value of money and therein supports the notion that the timing of receipts from a rental property can be as important as the amount received.

Unlike some other popular returns used by investors to analyze the performance and profitability of rental income properties that don’t account for the time value of money such as capitalization rate and cash on cash, IRR does.

As a result, because it calculates for time value of money and provides a linkage between present value (PV) and future (FV) of any benefit stream, internal rate of return is generally more popular amongst real estate investors than other rates of return.

The idea is straightforward.

Because a dollar in the hand today is preferable to one a year or five years from now, real estate investors want to take into account both the timing and the scale of cash flows generated by the income-producing property to determine what that rental income stream is worth today. Internal rate of return reveals the rate at which future cash flows must be discounted to equal the amount of investment exactly.

How IRR Works

Internal rate of return reveals in mathematical terms what a real estate investor’s initial cash investment will yield based on an expected stream of future cash flows discounted to equal today’s dollars, not tomorrow’s dollars.

Consider this.

When you make a real estate investment, you are investing cash in order to receive a series of future annual cash flows resulting from rental income plus a tidy profit when you sell the property.

The challenge for real estate investors, then, is to discover what rate of return the investor’s initial equity will make based upon those periodic future cash flows at the same time it considers the number of time periods (years) under consideration in the holding period.

The internal rate of return model meets that challenge by creating a single discount rate whereby all future cash flows can be discounted until they equal the investor’s initial investment.

How to Calculate

Calculating IRR manually is not practical because the calculation involves tedious mathematical solutions that take a lot time. Even skilled real estate analysts typically use a financial calculator or real estate investment software program to compute it.

So we’ll ignore the formula and just consider what it signifies.

Let’s assume that you have $300,000 to invest in an income-producing property and plan to hold it for seven years. During those years, you plan on receiving five annual cash flows and then an additional amount from the sale of the property (also known as reversion). When you find the unique rate of return that discounts the sum of all those future cash flows until it equals your initial investment, you will have the internal rate of return.

In other words, it shows you what your cash investment will yield for those cash flow projections based upon today’s value of the dollar, or as if those cash flows were collected today rather then in the future.

You should not, of course, rely on one single element of a real estate analysis to the exclusion of other factors and measurements to make your investment decision. But internal rate of return can help point you in the right direction and guide your purchasing decision so plan to use it.

One final thought. If you are serious about real estate investing, then it is highly recommended that you invest in a real estate investment software solution. In this case, you not only will get a wide range of essential returns that includes IRR, but also benefit from all real estate analysis features that quality investment software provides.

About the Author:

James Kobzeff is the developer of ProAPOD – superior real estate investor software solutions since 2000. Create cash flow, rates of return, and other real estate analysis presentations in minutes.IRR and other returns made automatically! Learn more at => http://www.proapod.com

Article Source: ArticlesBase.comWhat Internal Rate of Return Means to a Real Estate Analysis

Ideal Gas Equation: PV=nRT




m pv rt

m pv rt

Use of Reverse Osmosis (RO) in Food and Beverage Plants

In a Food or Beverage plant, Reverse Osmosis (RO) is often used for plant service water and boiler water pre-treatment. More recently, RO is finding increasing use in the processing of food and beverage products, for example concentrating fruit juices.

The end use of the permeate (or reject water) will generally dictate the design of the Reverse Osmosis (RO) system. Since most boilers in a food plant tend to require low hardness and solids feed water, RO systems in this application are invariably followed by some type of further purification treatment, such as softening (if low pressure boilers are present), or demineralization (if higher pressure boilers are present). Reverse Osmosis equipment, by itself, is incapable of providing the boiler feed water quality demanded even by lower pressure boilers.

If Reverse Osmosis (RO) water (either permeate or reject) is used in other than boiler feed water applications, further purification of the fluid is generally not required.

If an RO system is directly involved in the processing of foods or beverages, RO performance (permeate or reject quality and flow) must be maintained at expected levels. If issues occur with the RO equipment, such as fouling, then the plant products’ quality or quantity is directly affected. This can have a drastic effect on plant profitability.

Understanding How Reverse Osmosis Works

In order to understand how RO works, one must look into the physics of osmotic pressure and semipermeable membranes.

A semipermeable membrane allows the passage of specific molecules through it. If a concentrated aqueous solution exists on one side of a semipermeable membrane, pure water molecules tend to spontaneously diffuse from the more dilute side of the membrane to the more concentrated side. This is called Osmosis.

As water molecules continue to flow across the membrane, the amount of water increases on the concentrated side of the membrane, as does its pressure, called the head pressure. Once this head pressure increases to a given level such that further water flow can no longer occur across the membrane, the system is said to be in equilibrium. The pressure at this point is called the Osmotic Pressure. It is proportional to the dissolved solids concentration in the more concentrated solution.

According to the Van’t Hoff equation for the calculation of osmotic pressure
(symbol P)…
PV = nRT = (g/m)RT or
P = (g/m)RT/V, where

R = universal gas constant, 0.0821 Litre•atm/(mol•K)
T = absolute temperature, K (degrees Kelvin)
g = solute weight, grams
V = volume of solution, Litres
m = molecular weight of solute, if non-ionic
n = moles
P = osmotic pressure, atmospheres

Using this equation, and applying it to an aqueous solution of 1,000 mg/L. of dissolved ionic solids, as CaCO3, we arrive at an osmotic pressure of 7.2 psi [50 kPa] at 77° F.

In general terms, the osmotic pressure averages about 1 psi [6.9 kPa] for every 100 mg/L. of dissolved solids.

By applying a pressure on the concentrated side of this membrane, we can cause this process to reverse. Pure water molecules (and dissolved gas molecules) can be forced to flow from the concentrated side to the dilute side.

This is the entire Reverse Osmosis or “RO” process in a nutshell. Water purification occurs when water molecules are forced to flow from a concentrated solution through a semipermeable membrane to the dilute side.

To overcome the osmotic pressure, and force water molecules to reverse flow, one must apply a pressure. The Net Driving Pressure needed is defined as:

NDP = Feed Pressure + Permeate O. P. (usually negligible) – Permeate Pressure – Feed O. P.
O. P. = Osmotic Pressure

The flow through an RO membrane is proportional to the NDP.

In order to obtain reasonable permeate flow rates, and to minimize membrane fouling, the applied feed pressure must be very much greater than the calculated P. It is generally in the range of 200 – 450 psi [1.4 - 3.2 MPa]. This high pressure requires specific design considerations of RO trains, and elements.

An in-depth analysis of Reverse Osmosis design for the Food and Beverage Industry, including tables and drawings can be downloaded in the free Layne Christensen white paper titled REVERSE OSMOSIS DESIGN FOR THE FOOD AND BEVERAGE INDUSTRY- WHAT YOU NEED TO KNOW.

As a leader in the development of reverse osmosis (RO) systems, Layne Christensen Company has the technical expertise to design and build reverse osmosis systems for all of your plant water needs.
Beyond RO, Layne Christensen’s Water Treatment Division Research & Development team focuses on refining and expanding the water treatment methods we currently employ so we can meet the most demanding challenges head-on with innovation.

About the Author:

An in-depth analysis of RO Design for the Food and Beverage industry is provided in the free ($97 value) Layne Christensen technical paper. Grab your copy of
Reverse Osmosis Design
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Industrial Reverse Osmosis

Article Source: ArticlesBase.comReverse Osmosis Design for the Food

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If you can spare five minutes to read this because you’re curious about the cheapest solar panel price per watt, you’re about to learn a lot. I will reveal the best techniques that will allow you to start taking advantage of enough free energy to keep your entire household running, and in addition, make a profit from it! Am i dreaming? Do yourself a favor and continue on with this brief article.

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