Net Present Value (NPV) refers to the sum of a series of cash flows in and out. NPV takes into account the series of cash paid or received in todayÂ’s value. This is different from a layman calculation of cash flows which only takes into account the dollar value of the cash flows. Take for example we take out $1000 from our pockets to invest in a business venture. In one yearÂ’s time, the business venture pays out $1,100 and we put this money into our pocket.
To a layman, the net investment gain is $100 ($1,100 – $1,000). Using NPV, the amount is smaller. This is because we take into account what our $1,000 initial amount would have earned us if we put it in the bank. Assuming that the interest rate is 5%, our $1,000 would have earned us $1,050. Therefore the net investment gained would have been $50 ($1,100 – $1,050). ThatÂ’s not all. The amount is what we gained in one yearÂ’s time. But in todayÂ’s time, that $50 would have worth less today. That means if we put less than $50 into the bank, we would have gotten that $50 in one yearÂ’s time. The exact amount is $47.62($50 / 105%). This amount is the Net Present Value of our cash out flow of $1,000 (denoted by a negative sign) and a cash inflow of $1,100 in one yearÂ’s time (denoted by a positive sign).
Sounds complicated? HereÂ’s another way of looking at it. That $1,100 in one year would have a present value of $1,047.62 ($1,100 / 105%). Since we took out $1,000 to gain that $1,100 (which has a present value of $1,047.62), the NPV is $47.62.
After you have understood the concept, you would not have to subject yourself to this kind of calculation. You can use a time line to present the above concept and an Excel Formula to calculate the Net Present Value.
Jason Khoo is the author of the website Advanced Excel Profit Centre. He hopes to share with his visitors how to simplify complicated calculations through the use of Excel. He also develop templates such as the NPV template, IRR templateto help users gain a better understanding of these concepts and make it more convenient for users to derive the values. He has also developed a business solution that helps budget planners consolidate budgets in SUPER quick time. The solution is also very useful for personal budgeting and analysis.
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If current news is any indication, Nanotechnology is poised to play a significant role in the development of clean, less expensive energy. The potential of nanotechnology for solving some of today’s greatest energy challenges is vast.
Nanotechnology refers broadly to a field of applied science and technology whose unifying theme is the control of matter on the molecular level in scales smaller than one micrometer, normally 1 to 100 nanometers, and the fabrication of devices within that size range. For scale, a single virus particle is about 100 nanometers in width.
Encompassing nanoscale science, engineering and technology, nanotechnology involves imaging, measuring, modeling, and manipulating matter at this length scale.”
At this size dimension, the physical, chemical, and biological properties of materials differ in fundamental and valuable ways from the properties of individual atoms, molecules, or bulk matter. The properties displayed at the nanoscale create a host of potential innovative uses for nanomaterials. One of these uses includes the creation of exciting and revolutionary energy applications. These potential nanoscale energy applications apply to a host of different sources of energy, including hydrogen, geothermal, unconventional natural gas, fission, and solar energy.
While hydrogen is an energy storage medium, it is not a primary energy source. Therefore, full realization of hydrogen as an alternative energy source is frustrated by gaps in technology, which do not precipitate the efficient and cost-effective storage and transport of hydrogen. Nanoscience provides new approaches to basic questions about the interaction of hydrogen with materials to enable the efficient and cost-effective storage and transport of hydrogen.
Applying nanotechnology to geothermal energy increases the opportunities to develop geothermal resources by enhancing thermal conductivity or aiding in the development of noncorrosive materials that could be used for geothermal energy production.
The recovery of unconventional sources of natural gas is yet another potential application of nanotechnology. Unconventional sources of natural gas include tight sandstones, shale gas, and coal bed methane. Nanotechnology applications may prove useful in accessing or exploiting these unconventional natural gas sources. For instance, nanocatalysts and nanoscale membranes may prove useful in assisting in Gas to Liquids production. Furthermore, certain nanostructured materials may assist in compressed natural gas transport.
Nanotechnology may also prove useful in solving the waste problems of the nuclear energy industry. For instance, certain nano-engineered barriers may prove useful in preventing the migration of or containing nuclear waste products.
Nanotechnology applications may assist in making solar energy more economical. Nanoscience can be utilized to improve the efficiency of photovoltaic cells, creating cost-efficient conversion systems, effective solar power storage systems or even the generation of solar energy on a larger scale. For instance, “nanopatterning” can artificially change the optical properties of materials to allow light to be trapped in solar cells.
Nanotechnology might someday allow for more powerful, more efficient and less expensive energy generation, storage transmission and distribution. Nanotechnology is being used to optimize production from existing energy sources and to exploit new sources such as geothermal, liquefied natural gas, nuclear and solar energy. Nanotechnology is also improving and opening new possibilities for the transmission and storage of energy, especially electricity and possibly hydrogen in the future. Nanotechnologies have the potential to reduce energy consumption by making it possible to manufacture lighter and/or more energy efficient cards and appliances. Even though nanotechnology is a relatively young field, the potential for future nanotechnology applications within the energy industry could turn out to be one of the most important technological developments of our time.
About the Author:
About the Publisher: This report is published by Energy Business Reports, an energy industry think tank and leading source for energy industry information and research products.
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