what is an irr or hurdle rate

The internal rate of return (IRR) for a cash flow stream is the interest rate (discount rate) that produces a net present value of 0 for the cash flow stream. That definition, however, can be less than satisfying when first heard.

"Home > Encyclopedia > I > Internal Rate of Return Internal Rate of Return IRR and Modified IRR Definitions, Meaning Explained, Usage, Example Calculations Business Encyclopedia ISBN 978-1929500109Updated 2018-04-10 © 2018 Solution Matrix Ltd IRR takes an ""investment view"" of expected financial results. This means that IRR, like other cash flow metrics, compares the magnitude and timing of investment returns to investment costs. Interpreting IRR in a way that makes practical sense for investors and decision makers is a challenge. What is internal rate of retu

rn? Internal Rate of Return ( IRR) is a financial metric for cash flow analysis, primarily for evaluating investments, capital acquisitions, project proposals, programs, and business case scenarios.

Like other cash flow metrics—NPV, Payback period, and ROI—the IRR metric takes an investment view of expected financial results. As a result, each of these financial metrics compares the magnitudes and timing of cash flow returns to cash flow costs, while each makes the comparison in its own way, and each carries a unique message about the value of the action. By definition, IRR compares returns to costs by by finding the interest rate that produces a zero NPV for the investment cash flow stream. Not surprisingly, interpreting IRR results in a way that makes practical sense for investors and decision makers is a challenge. IRR is All About a Cash Flow Stream IRR analysis begins with a cash flow stream, a series of net cash flow results expected from the investment (or action, acquisition, or business case scenario). Consequently, cash flows for IRR analysis might look like the figure below. Note especially In the figure: Each bar represents the net of cash inflows and outflows for one two-month period. Positive values are net inflows and negative values are net outflows. The complete set of net cash flow events is a cash flow stream. This stream shows expected cash flow results from one action, while the stream for a another action might show a different cash flow profile. When comparing IRRs for different streams, other things being equal, analysts view the proposal action with the higher IRR as the better choice. Notice especially the shape, or profile of this example stream. This figure represents a typical investment curve because: Net cash outflows at the outset and net cash inflows in later periods mean that costs initially exceed incoming returns. Returns eventually outweigh the costs and the investment brings a net gain. The IRR metric, in fact, ""expects"" this kind of cash flow profile—early costs and later benefits. As a result, when the cash flow stream has this profile, an interpretable IRR probably exists. When cash flow events have another profile, instead, the stream may not have an IRR. In addition, other strange IRR results may also appear when the profile is something other than an investment curve. As a result, other profiles can lead to multiple IRRs for the same stream, or a negative IRR for the stream. Consequently, in such cases, the resulting IRRs are either very difficult to interpret or meaningless Internal Rate of Return: Many Use IRR, Few Really Understand IRRMost people in business have at least heard of ""internal rate of return."" This is probably because financial officers often require an IRR estimate to support budget requests or action proposals. IRR is in fact a favorite metric of many CFOs, Controllers, and other financial specialists. Also, some businesspeople know of IRR because many organizations define a hurdle rate in terms of IRR. They specify, that is, an IRR rate that incoming proposals must reach or exceed to qualify for approval and funding. Two possible reasons for IRR's popularity may be the following: Firstly, many in the financial community see IRR as more ""objective"" than net present value (NPV). This is because NPV results from arbitrarily chosen discount rates while IRR, by contrast, results entirely from the cash flow figures themselves and their timing. Secondly, some also believe that IRR readily compares return rates with inflation, current interest rates, and financial investment alternatives. Note especially in the discussions below that this belief is sometimes supportable and sometimes not. It should be no surprise to learn that most businesspeople who are not in finance have a limited or poor understanding of IRR and its meaning. It may be more surprising, however, to learn that research on professional competencies finds consistently that most financial specialists who require IRRs with proposals or funding requests are themselves largely unaware of IRR's serious deficiencies. And, many are also unable to explain its meaning and proper use. Emphasize IRR Meaning and Interpretation This article emphasizes several IRR issues: Firstly, IRR meaning and interpretation. Secondly, common misconceptions and misuses of IRR. Thirdly, comparing IRR to other financial metrics. Fourthly, presenting modified internal rate of return ( MIRR) as an easy-to-understand alternative to IRR. Contents What is internal rate of return? Defining internal rate of return IRR. Example illustration. First IRR Interpretation: IRR as a measure of risk. Finding IRR: Can you actually calculate IRR? IRR Graphical Solution. IRR Spreadsheet Solution. Re-defining IRR: Why is it called internal rate of return? Second IRR interpretation: Financing costs and reinvestment gains. Is modified internal rate of return (MIRR) a better metric than IRR? How does Internal rate of return compare to NPV, ROI, and other financial metrics? IRR vs. MIRR, NPV, ROI, and Payback Period. IRR is the same as Yield to maturity (YTM) for bond investing. Is IRR appropriate for lease vs. buy analysis? What are other problem IRR results? Lease vs. Buy vs. IRR. Negative, multiple, and impossible IRRs. Four commandments for using IRR. Related Topics Is IRR another case of the emperor's new clothes? See the IRR Blog post. NPV, ROI, Payback and IRR cash flow metrics. See Financial Metrics. Defining Internal Rate of Return IRR First Textbook Definition Illustrated Example IRR's mathematical definition is easily understood by anyone with a basic grasp of time-value-of-money concepts. As the word ""return"" in its name implies, an IRR view of the cash flow stream is an investment view. This means essentially that the metric compares outgoing funds to incoming to the magnitude and timing of incoming returns. The best known IRR definition explains this comparison in terms that call for a basic understanding of cash flow discounting concepts: present value, net present value (NPV), and the role of the discount rate (interest rate) in determining NPV. IRR Definition 1 (Textbook Definition):

As a result, many businesspeople ask: What does that tell me about returns and costs? A First Interpretation of IRR Meaning: IRR As a Measure of Risk. Consider two investment proposals competing for funding: Case Alpha and Case Beta. The expected net cash flow streams for Alpha (A) and Beta (B) are as follows: Net CF Alpha Net CF Beta Now -$220 -$220Year 1 $120 $50Year 2 $100 $60Year 3 $80 $60Year 4 $55 $65Year 5 $35 $70Year 6 $20 $75Year 7 $10 $80Total $200 $240Comparing two net cash flow streams for IRR analysis. Different IRRs for Front Loaded vs. Back Loaded Cash Flow Streams Both cases call for an initial cash outlay of $220 However, Case Alpha brings a net gain of $200 over 7 years while case Beta brings a net gain of $240 over the same 7 years. Before finding IRRs and other metrics, note especially from the image how the two cash flow streams differ. Both streams qualify as investment curve profiles, but one is ""front loaded"" while the other is ""back loaded."" These terms refer to the timing of returns in the cash flow stream. Case Alpha (dark blue bars) has large early returns but these diminish year by year. Case Alpha is therefore front loaded. Alpha's profile could represent the acquisition of an income producing asset that becomes less productive or more costly to maintain each year. Case Beta (light yellow bars) has smaller returns at first, but Beta's returns grow each year. Beta is therefore back loaded. Beta's profile could result from funding a product launch that returns greater profits each year. The analyst therefore compares two different kinds of investments with the same metric, IRR, to help decide which is the better business decision. Using a spreadsheet or another IRR program to analyze the cash flow figures above, the IRR results are as follows: Case Alpha: IRR A = 30.6% Case Beta : IRR B = 20.8%IRR is the Dscount Rate That Brings NPV to Zero The next table and figure below show the result of applying IRR Definition 1, that is, finding IRR as the discount rate that brings an NPV of 0. Note that this example shows only one of the above cash flow streams, Case Alpha. Net CF PVNow -$220 -$220Year 1 $120 $92Year 2 $100 $59Year 3 $80 $36Year 4 $55 $19Year 5 $35 $9Year 6 $20 $4Year 7 $10 $2Total $200 $0The first column shows net cash flow each year, while the second column shows the discounted values (present values) of the same cash flows. Discounting here uses the IRR rate for this cash flow stream, IRR = 30.6%. Graph showing that a discount rate equaling the IRR rate leads to a total present value (NPV) of 0. The length of the one negative PV bar equals the total length of seven positive PV bars. This means that for this example, NPV=0. In this graph: Dark blue bars are future value net cash flows for Case Alpha. Light blue bars are present values of the same cash flows at IRR discount rate of 30.6%. You may just be able to see or imagine that the heights of the seven positive (upward pointing) light blue bars starting with Yr 1 add up exactly to the length of the one negative (downward pointing) light blue bar at ""Now."" As a result, the IRR definition is satisfied because the sum of positive present values exactly cancels the sum of negative PVs. Page Top Contents First IRR Interpretation IRR As a Measure of Risk Which investment choice should the analyst recommend, Case Alpha or Case Beta? Alpha has an IRR of 30.6%, while Beta has an IRR of 20.8%. Using IRR as the decision criterion—and with other factors being equal—the analyst will recommend the case with the higher IRR (Alpha) as the better choice. This recommendation may follow partly because a higher IRR indicates less risk. That is, IRR shows just how high inflation rates or risk probabilities have to rise in order to eliminate the present value of this investment. For Case Alpha, the discount rate would have to reach 30.6% to drain Alpha's results of present value. Case Beta would lose all present value if the discount rate rises to 20.8%. Most people, however, find this first interpretation of IRR of limited value for evaluating and comparing investment proposals. Later sections below, therefore, move to Firstly, find another IRR definition and interpretation that is more helpful. Secondly, compare IRR results with other cash flow metrics. Thirdly, present another cash flow metric that is easier to interpret than IRR. This is the modified internal rate of return ( MIRR ). Page Top Contents Finding the Internal Rate of Return IRR Can You Actually Calculate IRR? Analysts calculate cash flow metrics such as NPV, ROI, and even payback period, directly from formulas. However, the verbal IRR Definition 1 above does not readily lend itself to expression as a formula. Remember first that IRR Definition 1 refers to another metric that does calculate from a formula, net present value NPV. The panel below shows the formula for calculating NPV for a cash flow stream using end of period discounting. Calculating IRR is essentially a matter of setting NPV equal to 0, on the left side of the NPV formula, and then ""solving"" for the value of i on the right side. In reality, software actually finds i with a series of approximation trials. Here, the FV s in the formula are net cash flow figures for each period, i is the discount rate, while n is the number of periods. For Case Alpha and Case Beta, n = 7. That is, the cash flow stream covers 7 periods where each period is one year. Consequently, when met with a request for an ""IRR formula,"" about the only response possible is to start with (1) the NPV formula above and (2) the FVs (net cash flow values), and then proceed as follows: To find IRR: Set NPV equal to 0. Solve the formula for i . IRR = i when NPV = 0. In fact, there is no easy analytic solution to this request and most people will be unable to solve the NPV = 0 equation for i. As a result, It is more accurate to say that IRR is found by indirect means and not calculated directly. Consequently, analysts instead find IRR either by (1) graphical analysis or (2) as spreadsheets do, through a series of approximation trials (successive approximations). Page Top Contents Finding IRR With a Graphical Solution The graphical solution for IRR is useful for helpful for understanding the first IRR definition, above. Note especially that businesspeople in the pre-computer era relied heavily on the graphical approach for finding IRR. The alternative approach, successive approximations, was simply impractical, given the number of high precision calculations required. Now, of course the reverse is true. Analysts use spreadsheets or other software produce high precision IRRs almost instantly. And, the graphical solution serves simply as a teaching aid. The graphical approach begins with a table of discount rates and NPV values, such as the table below. This example shows NPVs for Alpha and Beta cash flow streams at 10 different discount rates. Note especially that NPVs here derive from the original net cash flow figures and the NPV formula above. to produce this table, the analyst had to calculate 20 NPV figures. Example Graphical Solution Discount Rate NPV Alpha NPV Beta0% $200.00 $240.004% $158.15 $170.058% $123.04 $114.7312% $93.27 $70.4016% $67.80 $34.4520% $45.82 $4.9824% $26.69 -$10.4428% $9.93 -$39.8832% -$4.85 -$57.0936% -$17.97 $-71.75The data above are plotted below, showing the relationship between discount rate (horizontal axis) and resulting NPV (vertical axis). Graphical solution for IRR. IRR for each cash flow stream is the NPV value (horizontal axis point) for which NPV=0. The graph shows that increasing the discount rate lowers NPV for both streams. The graph also shows how cash flow streams with a positive total net cash flow can produce NPVs that are either positive or negative, depending on discount rate. Regarding IRR, note especially: that Alpha's NPV reaches 0 at a discount rate of 30.6%, while Beta's NPV reaches 0 at a discount rate of 20.8%. From the graph, therefore, the analyst concludes that IRR A = 30.6%. and IRR B = 20.8%. Page Top Contents Finding IRR With a Spreadsheet Solution The NPV curves above are useful for helping show exactly the meaning of IRR Definition 1. Today, however, most people in business use spreadsheets or pre-programmed calculators to find IRRs. Either way, a program starts the approximation process using an arbitrarily chosen discount rate to calculate NPV for a cash flow stream. If the resulting NPV is not 0, the discount rate is adjusted, and the NPV calculation repeats. And the program checks again to see if NPV = 0. Trials of this kind repeats hundreds or thousands of times until a discount rate that does produce NPV = 0 appears. In Microsoft Excel, for instance, trials continue until Excel finds an IRR accurate to 0.00001 percent. Because trials execute very quickly, however, the IRR result seems to appear immediately with data entry. The IRR result appears in Excel cell B13. Note in the formula bar that the IRR result appears in cell B13 because this cell holds the Excel function for IRR. The function takes two arguments: Firstly, the the range of cash flow events (B3: B10), and secondly a ""guess"" for the first-pass IRR (0.1). The actual IRR result can turn out quite different from the initial guess. The analyst, for example, might enter a Microsoft Excel IRR function into an Excel formula like this:=IRR (B3: B10, 0.1)The spreadsheet cell with this formula shows the IRR for a worksheet range with net cash flow figures in cells B3 through B10. These cells could, for instance, hold the eight cash flow values for Case Alpha in the example above. Note also that the 0.1 figure is simply a user-provided first guess at the IRR. The guess is just a starting discount rate for calculating NPV on the first iteration and it can be almost anything. The IRR value itself will appear in the cell holding the above Excel formula. Here, the actual numerical result in cell B13 is 0.306325. However, the analyst will probably format cell B13 as a percentage so that the IRR result looks like this: 30.6%Page Top Contents Re-Defining IRR: Second Definition Why Is it Called Internal Rate of Return? The textbook IRR Definition 1 above explains how to find an IRR but says very little about what it represents. As a result, IRR's more important meaning is usually easier to understand interms of another IRR definition, one that refers to investment financing costs and reinvested returns. IRR Definition 2: The Internal Rate of Return (IRR) For a Cash Flow Stream is Based on 2 Assumptions: There is a financing cost (or opportunity cost) for using funds to make the investment. The calculation assumes that invested funds incur financing costs (or opportunity costs) until the final cash flow event. Incoming returns will be reinvested for the time remaining until the last cash flow event. IRR is then is the single interest rate for financing costs and for reinvestment earnings that sets the total gains exactly equal to total costs. The table below shows how IRR achieves this balance: This spreadsheet example helps explain why IRR is called ""Internal"" rate of return. At the IRR rate, investment returns equal total investment costs. Cash flow figures in blue cells are from example Case Alpha above. This example shows how the IRR rate causes total investment returns (cash inflows) to equal total investment costs (cash outflows). First, the spreadsheet finds IRR for the cash flow stream (blue cells). This rate then serves in calculating both returns and investment costs. Using the IRR rate, ""Total from inflows reinvested"" equals ""Financing costs. ""At IRR, Investment Costs Balance Investment Returns In the example, a cash outflow of $220 (at ""Now"") represents initial investment costs. Subsequently, each year after that, the investment brings positive cash flow returns. Excel's IRR function result appears in the yellow cell below Year 7 net cash flow, reporting an IRR of 30.63% for the net cash flow stream running from ""Now"" through Year 7. Therefore, the same IRR value of 30.63% is used for calculating both (1) reinvestment earnings and (2) financing costs. Consider first the interest earned by re-investing the incoming cash flows from Years 1 through 7. Because each incoming return is reinvested for the remaining years at an annual interest rate of 30.63%, the total seven year gains are $1,428.17 (inflows + interest earned). Now, assume the initial cash outflow of $220 is borrowed and financed at the same 30.63% annual rate. Because the total cost of repaying this loan is also $1,428.17, exactly (initial cash outflow plus financing), the IRR rate exactly balances total costs with total gains. Page Top Contents Interpreting the Second IRR Definition Financing Costs and Reinvestment Gains The second-definition example above should suggest a reason that financial people often trust IRR as an important decision criterion. First; remember that the IRR result assumes the use of funds to pay investment costs brings additional costs, either borrowing costs or opportunity costs. Second, remember also that incoming returns are reinvested, earning additional gains. These two assumptions provides meaning for another IRR interpretation, namely that the analyst will compare the IRR rate to actual financing rates and actual rates for reinvesting. These comparisons must be interpreted carefully, however, because It is easy to over interpret or misinterpret IRR at this point. Tempting But Faulty IRR Reasoning When an investment proposal produces IRR's like those shown above—30.6% for example—it is tempting to reason as follows:""For this investment, we will not actually borrow or pay an opportunity cost at the IRR rate. Therefore, our real financing cost will be subject to a much lower interest rate, closer to our cost of capital, probably less than 10%. Thus, [the reasoning goes], the investment is a net gain because financing rates will really be under 10%, while returns represent earnings at a much higher rate, something like 30.6%. ""In reality, that conclusion may or not be supportable, depending on the actual financing rates (or opportunity costs) and the actual reinvestment rates that apply. The conclusion is arguably valid only when the IRR rate is close to actual cost of capital and actual reinvesting rate. When IRR is quite different from actual rates, however, the same conclusion is more likely misleading or quite wrong. Why Does IRR Sometimes Overstate the Value of Returns? This kind of reasoning can grossly overstate the value of actions like Case Alpha. Suppose, for example, that the real earnings rate on reinvested returns is close to 8%, much lower than the stream's IRR of 30.6%. Notice especially : Cash flow stream Alpha has its largest returns in the first and second years of the 7-year analysis period. That is, Case Alpha is ""front loaded,"" or ""biased"" towards the early years. IRR therefore overstates the real earnings rate because it assumes year 1 and year 2 gains will earn at a 30.6% rate for all the remaining years. In fact, however, this long term of high-rate earnings will be absent. Cash flow stream Beta, on the other hand has a lower IRR than Alpha, but when real return earning rates are compared to the earnings that IRR assumes, Beta in fact has less ""missing"" returns of this kind than Alpha. IRR thus overstates the real value of Case Alpha far more than it overstates the value of Case Beta for two reasons: First, stream Alpha is front loaded and stream Beta is back loaded. Second, Alpha's IRR is further from the real reinvestment rate than Beta's IRR. In conclusion, one can reasonably view the investment outcome as a net gain when IRR exceeds the organization's cost of capital. Beyond this, however, further assessment of IRR magnitude can be problematic, especially when: IRR greatly exceeds cost of capital and the real earnings rate for returns Comparing two cash flow streams with different profiles as in the example above. This point appears again in the discussion below on Lease vs. buy comparisons. Page Top Contents Modified Internal Rate of Return MIRR Is MIRR a Better Metric Than IRR? MIRR is Easier to Interpret Than IRR. The meaning of IRR magnitude is difficult to interpret, as shown, because IRR can differ from the actual financing and earnings rate for returns. It is natural to ask, therefore, ""Why not use instead an internal rate of return metric that does reflect the real financing cost rate and real earnings rate for returns? ""In fact, exactly this solution is readily available as the modified internal rate of return ( MIRR) metric. Example: MIRR Calculates Directly From a Formula Input data for MIRR include the same net cash flow figures as IRR, but the MIRR calculation also requires a financing rate and a reinvestment rate as input. Here for comparison are the IRR and MIRR results for Cases Alpha and Beta from above. MIRR for this example assumes an 8% earnings rate for reinvested returns, and a 6% financing rate on costs. Case Alpha : IRR A = 30.6% MIRR A = 15.1% Case Beta: IRR B = 20.8% MIRR B = 14.7%Notice immediately that Case Alpha also has a higher MIRR value than Case Beta, but both MIRR values are much closer to each other than are the two IRR values. The full meaning of MIRR is easier to explain after showing first how to calculate MIRR. Unlike IRR, MIRR derivces directly from a formula: MIRR Calculates directly from this formula. To obtain MIRR, the analyst calculates: Future values of cash inflows using the reinvestment rate. Present values of the cash outflows using the financing rate. The radical sign calls for the n th root of the (Future Value)/ (Present Value) ratio. The number of periods in this case, n, is 7. Subtracting 1.0 from the resulting root yields MIRR. MIRR Example Calculation For example cash flow stream A using a reinvestment rate of 8%: FV (Positive CFs) = $120 · (1. 08) 6 + $100 · (1. 08) 5 + $80 · (1. 08) 4 + $55 · (1. 08) 3 + . . . . . . +35 · (1·08) 2 + $20 · (1. 08) 1 + 10 · (1. 08) 0 = $190.42 + $146.93 + $108.84 + $69.28 + $40.82 + $21.60$ + $10.00 = $587.91The anayst also calculates the Net Present Value of the negative cash flows, applying the financing rate (given as 6% in this case). Note, however, that for this simple example there is only one negative cash flow ($220) and because that occurs immediately (""Now""), its present value shows 0 discounting effect. PV (Negative CFs) = ($220) · (1.06) 0 = ($220.00)Negative cash outflows will have a negative present value, so the formula precedes the Present Value sum with a minus sign (""–"") making it a positive number. Using the above formula, MIRR for Investment Case Alpha is thus: MIRR Meaning is Easy to Understand Here, at last, is an investment result with a clear, easily understood meaning. If the original $220 cost is simply put on deposit in the bank, earning interest at the MIRR annual rate of 15.1% for 7 years, the total investment value with compound interest will be $587.91. If instead the investment cost of $220 is paid and the projected cash inflows from Case Alpha are reinvested at 8.0%, the total investment value for them with compound interest earnings will be the same $587.91. Similarly, Case Beta has a MIRR of 14.7%. If Case Beta's initial cash outflow is simply put on deposit for 7 years, earning interest compounded at the MIRR rate, the total value will be 573.76. If instead, the projected incoming cash flows from Case Beta are reinvested at the rate of 8.0%, the total value after 7 years will be the same $573.76. Note: To check these calculations yourself, use the more precise MIRR A rate of 15.0757% and MIRRBrate of 14.6732%. In Simpler terms, taking the actions proposed in Case Alpha and Case Beta brings the same results as simply putting the initial costs in the bank and receiving compound interest earnings at the MIRR rate!Note that IRR results show a large advantage for Alpha over Beta. The relative advantage of Alpha over Beta is much smaller in the MIRR results. In conclusion, most people can easily compare MIRR results with compound interest growth and understand the magnitude of the MIRR differences. As shown, understanding the meaning of the IRR difference is more problematic. Finding MIRR with Excel Incidentally, the MIRR formula is really a geometric mean, exactly the same formula used to find cumulative average growth rate for figures that grow exponentially such as compound interest earnings. And, calculations like those above can be avoided entirely by simply using Excel's MIRR function. For Case Alpha, whose cash flows are located in cells B3 through B10, using a reinvestment rate of 8% and financing rate of 6%,Excel's MIRR function for this example would be: =MIRR (B3: B10, 0.06, 0.08)Page Top Contents How Does IRR Compareto Other Cash Flow Metrics? IRR Results compare to Results from NPV, ROI, Payback, and Other Metrics Referring to the example cases above: Which is the better business decision, Case Alpha or Case Beta? Financial specialists in many organizations use IRR to address such questions, while recognizing also that important questions deserve more than a single financial metric. The prudent financial specialist, investor, or business analyst will compare both proposed actions with several financial metrics. Examples below show how different metrics may suggest different answers to the question. This section compares Alpha and Beta cases using net cash flow, internal rate of return, modified internal rate of return, net present value, return on investment, and payback period. IRR vs. Net Cash Flow, MIRR, NPV, ROI, and Payback Period IRR results in the above examples required only the net cash flow figures for each period (year). In order to compare investments with a wider range of cash flow metrics, however, the analyst must see individual cash inflows and outflows for each period along with the net figures. Cash Flow Cash In Flow Alpha Cash Out Flow Alpha Net Cash Flow Alpha Cash In Flow Beta Cash Out Flow Beta Net Cash Flow Beta Now 0 -220 -220 Now 0 -220 -220Yr 1 200 -80 120 Yr 1 100 -50 50Yr 2 200 -100 100 Yr 2 100 -40 60Yr 3 200 -120 80 Yr 3 100 -40 60Yr 4 200 -145 55 Yr 4 100 -35 65Yr 5 200 -155 35 Yr 5 100 -30 70Yr 6 200 -180 20 Yr 6 100 -25 75Yr 7 200 -80 10 Yr 7 100 -20 80Total 1,400 1,200 200 Total 700 -460 240Comparing Financial metrics from cash flow data This section compares different financial metric, calculating all from the set of cash flow figures above. Before calculating individual metrics, however, notice first some of differences between Alpha and Beta cash flows. First, Alpha's inflows and outflows are much larger than Beta's. Alpha (A) actually brings in larger inflows but these come at larger costs. This difference is not apparent when viewing only the annual net cash flow figures. Secondly, Alpha's large returns arrive early, whereas Beta's larger returns occur in later years. It will take more than one financial metric to fully develop the implications of these differences. Below are financial metrics calculated from the Case Alpha and Case Beta cash flow figures above: Financial Metrics Case Alpha Case Beta Net CF 200.00 240.00IRR 30.6% 20.8%MIRR 15.1% 14.7%NPV@5 % 148.80 155.01NPV@10 % 107.56 91.37ROI 16.7% 52.2%Payback 2.0 Yrs 3.4 Yrs = The better metric result in each row Total Net Cash Flow The net cash flow metric favors investment Beta over investment Alpha: Alpha brings a $200 net gain over 7 years, while Beta brings in $240. Beta thus has a $40 (20%) advantage in net cash flow over A. For business situations where cash flow and working capital are in short supply, this could be an important advantage for Beta. However, see the discussion on Payback Period, below, for a different view of these cash flow consequences. Internal Rate of Return (IRR)Case Alpha outscores Case Beta on the IRR metric, 30.6% to 20.8%. Both IRR figures are very likely above the company's cost of capital, and both proposals are thus viewed as net gains. Alpha's larger IRR can be taken as a signal that Alpha provides a better rate of return than Beta (assuming reinvestment of incoming cash flows). Beyond that, however, the IRR figures themselves do not show the magnitude of Alpha's real rate of return advantage over Beta. When IRRs are larger than cost of capital, by several times or more, the real rate of return difference between two investments depends heavily on: The timing of cash flows. The cash flow stream profiles. The actual rates available for cost of capital and earnings on returns The IRR figures say nothing about these factors. Modified Internal Rate of Return (MIRR)With an 8% real earnings rate for returns, Case Alpha slightly outscores Case Beta on the MIRR metric, 15.1% to 14.7%. MIRR's meaning is easily understood: MIRR essentially compares results to the growth of compound interest earnings. Assuming that incoming returns are reinvested at 8%, Alpha, for instance gives the investor exactly the same result as putting the initial cash outflow on deposit for seven years and receiving compound interest earnings at the MIRR annual rate, 15.1%. Net Present Value (NPV)According to the net present value metric, the better investment choice ( Alpha or Beta) depends on the discount rate. Thus, with a 5% discount rate, Beta's NPV of $155 exceeds Alpha's $149 NPV. However, NPV leadership reverses at higher discount rates. With discounting at 10%, Alpha's NPV of $107 is higher than Beta's $91. As the discount rate rises, Beta's large returns in later years suffer greater discounting impact than Alpha's larger returns in the early years. This illustrates one reason some financial specialists prefer IRR to NPV when choosing between competing proposals: The analyst arbitrarily chooses a discount rate to calculate NPV. This may determine results of the comparison as the NPV example here shows. IRR, on the other hand, is sometimes seen as more ""objective"" because it does not rely on an arbitrarily chosen rate. IRR instead uses net cash flow figures themselves to find a rate that satisfies its definition. Return on Investment (ROI)According to the ROI metric, it is ""no contest!"" Beta's ROI of 52.2% beats Alpha's ROI of 18.7%, hands down. The ROI metric shown here is Simple ROI (the ratio of incremental gains to investment costs). All cash flow metrics above show both actions as resulting in net gains for the investor. ROI alone, however, is sensitive to the magnitudes of individual annual inflows and annual outflows. By contrast, the other metrics derive only from the net cash flow figures. Alpha's larger total costs ($1,200) are compared directly to Alpha's incremental gain of $200. Beta scores much higher on ROI because Beta has a larger incremental gain ($240) and a much smaller total cost ($460). Other metrics that derive from net cash flow are blind to the large differences in costs. This could be problematic because the investor must budget these costs and pay them, no matter how large the returns. The investor may simply have trouble providing the larger funding costs. Payback Period The payback period metric shows that investment Alpha ""pays for itself"" in 2.0 years, while Beta needs 3.4 years to fully cover investment costs. Investors prefer shorter payback periods over longer payback for at least two reasons. First, the investment funds are available again for re-use sooner with a shorter payback period. Second, investors see the longer payback period as more risky. Financial Metrics Conclusions When stating a decision criterion as a general rule, business analysts and finance officers often borrow a phrase that is a favorite of economists: Other things being equal, the investment (or action, or decision, or scenario) with the higher IRR is the better business decision. The different financial metrics comparisons above show that IRR is blind to many ""other things"" that may differentiate competing investments, and these things may have important financial consequences. And, they are very rarely truly equal. When the investor can or will make only one of the two proposed investments, the choice of one over the other represents so-called constrained financing. Consequently, analysts usually recommend that IRR not be used as a decision criterion when comparing competing mutually exclusive investments or actions. Rewards Must Compare Favorably to Risks Finally, In business investing—as in gambling—a wise investment (or a good gambling bet) is one where potential rewards compare favorably with investment risks. None of the metrics above fully measures investment risk, although risk considerations are partially visible in IRR, NPV, and payback period: An Investment with a high IRR can be viewed as less risky than a low IRR investment. Interest rates for discounting cash flow include a ""risk"" component and an ""inflation"" component. If inflation rates rise during the investment period, or if the appropriate discount rate for NPV rises because of risk considerations, the high IRR investment retains greater NPV than the lower IRR investment. Analysts view longer payback periods as more risky than shorter paybacks, simply because of the longer time it takes to recover investment funds. When using the above metrics as decision criteria, however, the prudent investor will attempt to assess the likelihood that returns actually appear as projected, as well as the likelihood that other better and worse results appear. IRR is the Same Metric as Yield to Maturity (YTM) for Bond Investing Another reason that IRR is a popular metric for people trained in finance, is that IRR is usually center stage when evaluating bond investments. Note, however, that in bond investment, the sam IRR metric is known as yield to maturity ( YTM ). If the IRR exercises above remind you of something you have seen before—solving an NPV equation for an interest rate—it is likely you are already familiar with the yield to maturity concept in bond investing. IRR and YTM are mathematically the same concept, with only a slight difference in definition. Yield to maturity is the interest rate, i, that satisfies this version of the NPV equation: Bond Purchase Price = FV 1 / (1+ i ) 1 + FV 2 / (1+ i ) 2 + ... + FV n / (1 + i ) n This definition for YTM transforms into Definition 1 for IRR, simply by subtracting ""Bond Purchase Price"" from each side of the equation. Thus, bond purchase price becomes the FV 0 in the NPV equation used above for IRR Definition 1. Remember that IRR is the interest rate that solves this form of the NPV equation:0 = FV 0 + FV 1 / (1+ i ) 1 + FV 2 / (1+ i ) 2 + ... + FV n / (1 + i ) n Given the same cash inflows and outflows, the same value of i solves both equations. This suggest another reason that IRR is popular with financial specialists. IRR serves evaluate and compare different business investments, even when the investments are quite different in nature. For more complete coverage of yield and other bond concepts, see the encyclopedia entry Bond. Page Top Contents Is IRR Appropriate for Lease vs. Buy Decisions? What Are Other Problem IRR Results? IRR can usually be found and usefully interpreted when based on net cash flow streams with the ""investment curve"" profile shown above: Net cash outflows appear very early in the stream while net cash inflows follow through the rest of the life. This profile is common for some kinds of financial transactions, such as bond investments or bank deposits. The same profile may also characterize some investments in income-producing assets, or sometimes even the financial consequences of projects, programs, product launches, and other actions. In many organizations, however, the routine practice—or policy—is to require IRR estimate for all action proposals, even when expected cash flows do not fit the investment curve profile. Consequently, those who must provide IRR support for their proposals may react with surprise and dismay when they produce the metric and find any of the following: An IRR does not exist for their cash flow stream. Multiple IRRs exit for a single stream. There is a negative IRR. One proposed action shows an IRR 10 or 20 times larger than a competing option. In such cases, IRR is simply inappropriate for evaluating the investment or action. Lease vs. Buy vs. IRRWhen the Lease option in a ""Lease vs. Buy' comparison involves a typical operating lease, the two net cash flow streams in view have these characteristics: The ""Buy"" option starts with a high initial cash outflow for asset purchase. In the remaining years of the purchased asset's life, it should earn returns, leading to positive net cash flows most periods. The ""Lease"" option for the same asset starts with a very small initial cash outlay (if any) for the first period. Periodic net cash flows for following periods should be almost the same as the net returns under the ""Buy"" option, but slightly less due to the periodic leasing fees. These cash flow streams fit this pattern: Purchase & Lease Cash Flow Buy Asset Net CF Lease Asset Net CFNow -$215 -$5Year 1 $100 $70Year 2 $100 $70Year 3 $100 $70Year 4 $100 $70Year 5 $100 $70Year 6 $100 $70Year 7 $100 $70Total $2485 $485The ""Buy"" stream has an IRR of 42.6%. And, the ""Leasing"" option has an IRR of 1,400.0%. Imagine choosing between these two options using IRR as the sole decision criterion!In fact, when results of this kind appear, most people immediately ask: ""What's wrong with this picture?"" Here are three of the problems: What's wrong with this IRR picture? The analyst can properly refer to the Buy option as an ""investment."" A better description of the Lease option is a 7-year ""commitment to a service contract with periodic fees."" The two profiles differ substantially from each other. Note especially that the Lease profile is not an investment curve. IRR looks only at the net cash flow figures each year. The larger positive inflows each year ""mask,"" or ""hide"" the leasing costs from IRR. Some analysts may compare these investment options with the Simple ROI metric, in preference to IRR. Simple ROI is sensitive to individual periodic cash inflows and outflows. Note especially that both options have exactly the same ROI, that is, 226%Both IRRs are certainly much higher than the company's real cost of capital and real earnings rates for returns, especially the Lease option IRR. The analyst who still insists on taking an ""investment"" view of both options should probably turn instead to the modified internal rate of return MIRR. Here, MIRR for the Buy option is 22.5%, while MIRR for the Lease option is 99.3% (basing MIRR on an 8% earnings rate for returns). As a result, ""Lease vs. Buy"" decisions that turn entirely on IRR values almost always favor leasing as the better business decision. This is because IRR views both actions as financial investments. In the Lease vs. Buy decision, however, decision makers may consider factors other than IRR as more important, such as the impact on the company's asset base, tax consequences, and flexibility to upgrade or replace assets. Negative, multiple, and Impossible IRRs For some cash flow streams it is mathematically possible to produce negative IRRs, or multiple IRRs (more than one discount rate that leads to a 0 NPV for a single cash flow stream). In addition, for other cash flow streams, there is simply no mathematically correct IRR solution. No IRR Solution. There are many possible cash flow stream profiles that for which there is no IRR solution. Firstly, there may very well be real cash outflows and real cash inflows every period, but when the inflows always outweigh outflows, net cash flow is therefore positive every period. Therefore, cash flow streams with positive net cash flows only, do not have an IRR solution. Secondly, when cash outflows outweigh cash inflows every period, net cash flow every period is negative. There is also no IRR in such cases. Some other cash flow stream profiles that include both negative and positive periodic net cash flows, for which an IRR solution is still impossible. Multiple IRRs. A net cash flow stream will have multiple IRRs when it Includes more than one sign change in the net cash flow figures. When the first periodic net cash flow is negative and the second net cash flow is positive, that is one sign change. And, If there are no more sign changes in later periods, there will be no more than one IRR for the stream. If another, later, net cash flow event is negative, that makes 2 sign changes. There can be one IRR for every sign change in the cash flow stream. Therefore, a cash flow stream with 4 sign changes may have up to 4 IRR values. When multiple IRRs exist for a single stream, analysts may simply consider the IRR closest to the real cost of capital as the ""true"" IRR. Negative IRR. It is also possible for some net cash flow streams to produce a negative IRR value. When the stream of net cash flow figures leads to a negative IRR, the analyst may simply consider the investment or action a ""net loss. ""Further quantitative analysis of negative IRRs, however, is almost always meaningless. Analysts should disregard negative IRRs when preparing IRR averages, or weighted average IRRs for multiple actions. Page Top Contents Using IRR: The Four Commandments But How Long is Life? The IRR outcomes and problems above help explain four ""commandments"" of IRR usage: IRR is not appropriate when the net cash flow stream differs substantially from the profile with early net cash outflows and later net cash inflows. Do not use IRR to compare competing cash flow streams whose profiles differ substantially from each other. The analyst should not over interpret IRR magnitude and return rates when IRR differs substantially from the real cost of capital and real earnings rates for returns. Do not expect to find an IRR when the net cash flow stream is entirely positive or entirely negative, because there is no IRR for such situations. Page Top Contents By Marty Schmidt© Solution Matrix Ltd 2004-2018 Find us on Facebook Linkedin Twitter Contact us Share "

In the net present value analysis, hurdle rate is the rate used to discount future net cash flows of the project. If the actual return on the project is higher than the hurdle rate, the net present value is positive and the project is accepted. In internal rate of return analysis, if IRR is greater than the hurdle rate, the project is accepted otherwise rejected. Hurdle rate for a particular project is estimated based on a number of factors; the most important being the cost of capital of the company.

Hurdle Rate In the context of capital budgeting and investment analysis, hurdle rate is the minimum required rate of return which businesses use as benchmark to decide whether to invest in the project or not. Any potential project must provide a return higher than the hurdle rate in order to be feasible for investment.

Hurdle rate is often adjusted up and down based on the perceived riskiness of the project. If risk inherent in a particular project is higher than the average risk, the hurdle rate is higher than the weighted average cost of capital of the company and if the risk is lower, the hurdle rate is lower too. Formula Capital asset pricing model is applied to estimate the risk-adjusted hurdle rate for a project. Risk-adjusted discount rate = risk free rate + project beta * (average return – risk free return)Risk free rate is the rate on a theoretically risk free investment. Return on long-term government securities provide a good approximation of the risk free rate. Project beta is a coefficient that measures the riskiness of an investment. Higher beta means more risk and lower beta means lower risk. Average return is the average return on all investments. It is approximated by the return on broad market index such as S&P500. Example You are financial analyst at Jovan Arsen, Inc., a bus operator which is interested in bidding for a public transport tender of a city government in a South Asian country. The project requires Jovan to purchase and operate buses on designated routes. Following data is available: The company has to invest in 50 buses each costing $50,000 and operate it for 5 years. Total initial investment outlay is expected to be $3 million. The project has no salvage value. The city government has guaranteed to ply each bus for at least 50,000 kilometers at $1.75 per kilometer. The company’s variable costs are $1 per kilometer and its fixed costs are $250,000 per annum. Risk free rate is 5% and the company’s risk analyst has worked out the project beta to be 1.8. Return on the broad market is 10%. Weighted average cost of capital of the company is 8%. The country has offered full tax exemption. Solution We need to work out the net after tax cash flows for each of the five years of the project, which are calculated as follows: Net annual cash flows = annual cash inflows – annual cash outflows Annual cash inflows = rate/km ($1.75) * number of kilometers (50,000) * number of buses (50) = $4.375 million Annual cash outflows = variable cost ($1) * number of kilometers (50,000) * number of buses (50) + fixed costs ($250,000) = $2.75 million Net annual cash flows = $4.375 million - $2.75 million = $1.625 million Net initial investment = $3 million In order to do the net present value analysis, we need to discount the future cash flows. The hurdle rate to be used for discounting must be based on the risk inherent in the project. Capital asset pricing model can be used to calculate the risk-adjusted discount rate to be used. Hurdle rate = 5% + 1.8 * (10% - 5%) = 14%The present value factor for 5 years annuity is 3.4331. Present value of future net cash flows = 3.4331 * $1.625 million = $5.56 million Net present value = present value of cash flows – initial investment = $5.56 million - $3 million = $2.56 million Since the project has positive NPV at the given hurdle rate of 14%, the project should be accepted. Written by Obaidullah Jan, ACA, CFA hire me at Related Topics Net Present Value Internal Rate of Return Capital Asset Pricing Model Cost of Capital


definition of objective in project management

In PMBOK 2004 project objectives were defined as the measurable success criteria of the project (including cost, business, technical, and quality targets). It says further, that each objective should have an attribute, a metric and an absolute or relative value.

"Can anyone summarize the definition of ""project objectives""in the new version of PMBOK 2013?"

"Question Asked 4 years ago Bassam Hussein16.32 Norwegian University of Science and Technology Can anyone summarize the definition of ""project objectives""in the new version of PMBOK 2013?

(Cost, US dollar, less than 1000) meaning that the objective is to keep the costs lower than 1000 USD. Now in the current edition of the PMBOK 2013 this definition was taken out. Under chapter 4.1.3.1 Project Charter it stated that one of the components in the charter is: ""Measurable project objectives and related success criteria. ""Can anyone exemplify this point? What would be the measurable objective and its related success criteria? Are not they the same? On the same page, the following is added: ""Project approval requirements (i.e., what constitutes project success, who decides the project is successful, and who signs off on the project)."" But, what is constitute project success, achieving project objectives and related success criteria? This is confusing, does anyone one have any thought on that? Project Evaluation Project Planning Project Development PMIProject Management Share1 Recommendation All Answers ( 3)4 years ago Mohamed Benmerikhi EDHEC Business School Dear Bassam,You are quite right in asking the question. It is not always clear in the PMBOK Guide. I would like to point out that there is a slight confusion between ""project objectives"" and ""project management objectives""Project objectives refer to what it is that the project aims to achieve; while cost, quaity, time...etc are project management objectives. The project charter specifies the project objectives. This document is an output of the project initiation phase. The following planning phase would use some form of decomposition method to breakdown these objectives into manageable bits of work (i.e. WBS, work packagesd), components...etc. From here onwards, other tools and techniques would be applied to achieve these bits. Obviously, each part of the WBS needs resources and time allocations, and this is where measurable objectives starts to make sense. This is because the aggregation of all components of the WBS represents the project objectives, at least in theory. Because often we end up with discrepancies between what is planned and what really occurs, but this is a different debate. Objectives should always be SMART: Specific, Measurable, Attainable, Realistic, Timely.4 years ago Seithikurippu R. Pandi-Perumal Added an answer Hi Bassam,""Measurable project objectives and related success criteria"" ----> This refers to the following: Present Value (PV), Discounted Cash Flow, Net Present Value (NPV), Internal Rate of Return (IRR), Benefit Cost Ratio (BCR), Economic Value Added (EVA), Return On Investment (ROI), Return On Invested Capital (ROIC), Payback Period, Opportunity Cost. These are set of formulas in PM field that someone has to be familiarize with. These are certain measurement methods used by project managers during initiation phase to see if the project is feasible first of all, will the project be worth pursuing or successful or beneficial to the stakeholders. Other success criteria refers to: feasibility studies and project triggers (e.g. market demands, customer request, organizational requirements, technological advances, legal requirements, ecological impacts, and social needs. For example, if I ask you to initiate a project and pay you 100,000 dollars, that means, it could be any of the above reasons. First of all, I might want to make a million dollars. Second of all, I have asked you to do, because of some regulatory requirements or ecological impact. If you can read and understand what these terms really means, you will understand what PMBOK exactly means. PMBOK covers minimum, but as a project manager, you have to read and understand many related issues. Reading PMBOK is reading a bible or Bagvad Gita or reading a jurisprudence textbook. What other authors would describe in one or two pages would be told in two sentences. That is the source of your confusion. You should try to read some good PMP books to gather all such minute details. @ Mohammad: your response is very confusing. There is a 'project objective' and there is a 'management by objectives'. What do you exactly mean by 'project management objective'? . Further you go on saying, ""cost, quality, time...etc are project management objectives."" All these are refers to 'project constraints' and not 'project management objectives'. Secondly, 'develop project charter' is one of the 'process' within the 'initiating phase of the project integration management'. Your statement, ""each part of the WBS needs resources and time allocations, and this is where measurable objectives starts to make sense"" is totally wrong. This is nothing to do with project objectives. Of course, one can see the time and resource allocation with regards to WBS. your interpretation, 'This is because the aggregation of all components of the WBS represents the project objectives' is wrong again. A WBS is often considered as a product-oriented family tree, which is intended to completely define 'everything' in the program. A WBS displays and defines the products (s) to be developed or produced and relates the elements of work to be accomplished to each other and to the end product. A WBS displays and defines the products (s) to be developed or produced and relates the elements of work to be accomplished to each other and to the end product.3 years ago Youssef Ait Boudlal University of Louisville Hi Bassam,there is no general acceptable definition of project success. As stated by Freeman and Beale (1992), “an architect may consider success in terms of aesthetic appearance, an engineer in terms technical competence, an accountant in terms of dollars spent under budget, and chief executive officers rate their success in the stock market"". My previous (empirical) study revealed that project success depends on project type and project size. For construction projects, the top-three project success criteria are budget/cost, profitability, and schedule. For engineering and information technology projects, the emphasis is different, thus budget/cost, schedule and customer satisfaction. However, customer satisfaction is not used for judging projects of size less than $100,000. It seems also that the schedule it not the focus of project of the size more than $50 million. According to this study the most used criteria to judge projects are: (1) budget/cost, (2) schedule, (3) customer satisfaction, (4) stakeholder satisfaction, (5) scope, (6) financial objectives, (7) technical objectives, (8) customer approval, and (9) profitability. I hope this will help you to understand the topic related to project succes and the criteria to judge that success. Can you help by adding an answer? Answer Add your answer "


what contains capsaicin

17Capsaicin is a chemical compound found in varying amounts in chili peppers. When it comes in contact with your skin or mucous membranes it produces a bu

Which Peppers Are High in Capsaicin?

Which Peppers Are High in Capsaicin?by RYAN HAAS Oct. 03, 20

rning sensation. The amount of capsaicin in a specific species of pepper is measured using the Scoville scale, which chemist Wilbur Scoville developed in 1912 to measure how much a pepper capsaicin oil extract needed to be diluted until its heat is just barely detectable. Pure capsaicin measures 16,000,000 on the Scoville scale. Video of the Day Error loading player: Flash plugin failed to load Bhut Jolokia Chili At this time, the Bhut Jolokia chili holds the distinction of being the world’s hottest chili pepper. The Chile Pepper Institute of New Mexico State University reports that the average capsaicin content of the Bhut Jolokia measures 1,001,304 Scoville units. That scorching pepper is commercially available for purchase and has been confirmed by the “Guinness Book of World Records” as the hottest pepper in the world. It is native to northeast India. Naga Viper In 2010, the U. K. Daily Mail reported on the Naga Viper chili, an especially spicy pepper created by crossbreeding three of the spiciest varieties of peppers. Tests conducted at Warwick University confirmed that the Naga Viper beat the Bhut Jolokia chili in capsaicin content by measuring 1,359,000 Scoville units. However, the Chile Pepper Institute states that because the Naga Viper comes from a single plant created by English pub-owner Gerald Fowler and is not commercially available, so it can not officially be labeled as the hottest pepper in the world. Habanero Habanero peppers are among the most capsaicin-rich chilies that are commonly available. A 2006 study published in the “Journal of Environmental Science and Health” found that Capsicum chinense, the genetic species habanero peppers are a part of, have the highest concentrations of capsaicin when compared to other peppers from the genus Capsicum. The Chile Pepper Institute reports that the average spice of an orange habanero is 210,000 Scoville units and the red habanero is 150,000 units. However, habanero chilies can sometimes exceed 300,000 units. Tabasco Chili In the same 2006 study, Kentucky State University researchers found that peppers from the species Capsicum frutescens had the highest concentration of dihydrocapsaicin, a different alkaloid form of capsaicin. That group includes the Tabasco chili, which has a capsaicin concentration that gives it an average rating of 120,000 Scoville units. Other spicy peppers in the Capsicum frutescens species include the malagueta and Thai peppers. Lose Weight. Feel Great!Change your life with My Plate by LIVE STRONG . COMGOALGENDER AGEWEIGHT HEIGHTGET MY CALORIE GOALYOU MIGHT ALSO LIKEHealth Benefits of the Habanero Pepper The Toxicity of Capsaicin Remedies for a Jalapeno Skin Burn Is Too Much Capsaicin Bad for You? Benefits of Cayenne Pepper Pills How to Treat Lips That Burn From a Hot Pepper How to Remove Capsaicin From Skin How to Neutralize Acid in Chili Peppers Can Eating Cayenne Pepper Help Unclog Arteries? What Are the Health Benefits of Capsaicin? Foods That Have Capsaicin The Benefits of Habanero Pepper & Cayenne Does Cayenne Pepper Burn Fat? Cayenne Pepper and Blood Sugar Capsicum Annuum for Weight Loss How to Neutralize Hot Foods in the Mouth Effects of Capsaicin on Digestion Health Risks of Hot Pepper Do Red Bell Peppers Burn Fat? Which Hot Peppers Speed Up Your Metabolism Best?


what are the complications of varicose vein

In some cases, varicose veins can cause complications, such as pain, blood clots, or skin ulcers. If your condition is more severe, your doctor may recommend one or more medical procedures. Some people choose to have these procedures to improve the appearance of their varicose veins or to relieve pain.

Varicose Veins

"Varicose Veins

Varicose (VAR-i-kos) veins are swollen, twisted veins that you can see just under the surface of the skin. These veins usually occur in the legs. However, they also can form in other parts of your body. Varicose veins are a common condition. They usually cause few signs or symptoms.

In some cases, varicose veins may cause complications, such as mild to moderate pain, blood clots, or skin ulcers. Veins are blood vessels that carry blood from your body's tissues to your heart. The heart pumps the blood to your lungs to pick up oxygen. The oxygen-rich blood is then pumped out to your body through your arteries. From your arteries, the blood flows through tiny blood vessels called capillaries, where it gives up its oxygen to the body's tissues. Your blood then returns to your heart through your veins to pick up more oxygen. Veins have one-way valves that help keep blood flowing toward your heart. If your valves are weak or damaged, blood can back up and pool in your veins. This causes the veins to swell and can lead to varicose veins. A number of factors may increase your risk for varicose veins. These include family history, age, gender, pregnancy, overweight or obesity, and lack of movement. Varicose veins are treated with lifestyle changes and medical procedures. The goals of treatment are to relieve symptoms, prevent complications, and improve appearance. Outlook Varicose veins usually don't cause medical problems. If your varicose veins cause few signs and symptoms, your doctor may suggest simply making lifestyle changes.

A number of treatments are available for varicose veins that are quick and easy and don't require a long recovery time. Vein Problems Related to Varicose Veins A number of vein problems are related to varicose veins, such as telangiectasias (tel-AN-juh-ek-TA-ze-uhs), spider veins, varicoceles (VAR-i-ko-seals), and other vein problems. Telangiectasias Telangiectasias are small clusters of blood vessels. They're usually found on the upper body, including the face. These blood vessels appear red. They may form during pregnancy and often are found in people who have certain genetic disorders, viral infections, or other medical conditions, such as liver disease. Because telangiectasias can be a sign of a more serious condition, see your doctor if you think you have them. Spider Veins

Spider veins are a smaller version of varicose veins and a less serious type of telangiectasias. Spider veins involve the capillaries, the smallest blood vessels in the body. Spider veins often show up on the legs and face. They usually look like a spider web or tree branch and can be red or blue.

They usually aren't a medical concern. Varicoceles Varicoceles are varicose veins in the scrotum (the skin over the testicles). Varicoceles may be linked to male infertility. If you think you have varicoceles, see your doctor. Other Related Vein Problems Other types of varicose veins include venous lakes, reticular veins, and hemorrhoids. Venous lakes are varicose veins that appear on the face and neck. Reticular veins are flat blue veins often seen behind the knees. Hemorrhoids are varicose veins in and around the anus. Back to Top What Causes Varicose Veins? Weak or damaged valves in the veins can cause varicose veins. After your arteries deliver oxygen-rich blood to your body, your veins return the blood to your heart. The veins in your legs must work against gravity to do this. One-way valves inside the veins open to let blood flow through and then shut to keep blood from flowing backward. If the valves are weak or damaged, blood can back up and pool in your veins. This causes the veins to swell. Weak valves may be due to weak vein walls. When the walls of the veins are weak, they lose their normal elasticity. They become like an overstretched rubber band. This makes the walls of the veins longer and wider and causes the flaps of the valves to separate. When the valve flaps separate, blood can flow backward through the valves. The backflow of blood fills the veins and stretches the walls even more. As a result, the veins get bigger, swell, and often get twisted as they try to squeeze into their normal space. These are varicose veins. Normal Vein and Varicose Vein The illustration shows how a varicose vein forms in a leg. Figure A shows a normal vein with a working valve and normal blood flow. Figure B shows a varicose vein with a deformed valve, abnormal blood flow, and thin, stretched walls. The middle image shows where varicose veins might appear in a leg. You may be at higher risk for weak vein walls due to increasing age or a family history of varicose veins. You also may be at higher risk if you have increased pressure in your veins due to overweight or obesity or pregnancy. Back to Top Who Is At Risk A number of factors may increase your risk for varicose veins, including family history, age, gender, pregnancy, overweight or obesity, and lack of movement. Family History Having family members who have varicose veins may raise your risk for the condition. About half of all people who have varicose veins have a family history of them. Age Getting older may put you at higher risk for varicose veins. The normal wear and tear of aging may cause the valves in your veins to weaken and not work as well. Gender Women tend to get varicose veins more often than men. Hormonal changes that occur during puberty, pregnancy, menopause, or with the use of birth control pills may raise a woman's chances of getting varicose veins. Pregnancy During pregnancy, the growing fetus puts pressure on the veins in the legs. Varicose veins that occur during pregnancy usually get better within 3 to 12 months of delivery. Overweight or Obesity Being overweight or obese can put extra pressure on your veins. This can lead to varicose veins. Lack of Movement Standing or sitting for a long time, especially with your legs bent or crossed, may raise your risk for varicose veins. This is because staying in one position for a long time may force your veins to work harder to pump blood to your heart. Signs and Symptoms The signs and symptoms of varicose veins include: Large veins that you can see on your skin. Mild swelling of your ankles and feet. Painful, achy, or ""heavy"" legs. Throbbing or cramping in your legs. Itchy legs, especially on the lower leg and ankle. This is sometimes incorrectly diagnosed as dry skin. Discolored skin in the area around the varicose vein.

Signs of telangiectasias are red clusters of veins that you can see on your skin. They're usually found on the upper body, including the face. Signs of spider veins are red or blue veins in a web pattern that often show up on the legs and face. See your doctor if you have these signs and symptoms.

They also may be signs of other, sometimes more serious conditions. Complications Sometimes varicose veins can lead to dermatitis (der-ma-TI-tis), an itchy rash. If you have varicose veins in your legs, dermatitis may affect your lower leg or ankle. Dermatitis can cause bleeding or skin ulcers if the skin is scratched or irritated. Varicose veins also may lead to a condition called superficial thrombophlebitis (THROM-bo-fleh-BI-tis). Thrombophlebitis is a blood clot in a vein. Superficial thrombophlebitis means that the blood clot occurs in a vein close to the surface of the skin. This type of blood clot may cause pain and other problems in the affected area. Back to Top Diagnosis Doctors often diagnose varicose veins based on a physical exam alone. Sometimes tests or procedures are done to find out the extent of the problem and to rule out other disorders. Specialists Involved If you have varicose veins, you may see a vascular medicine specialist or vascular surgeon. These are doctors who specialize in blood vessel conditions. You also may see a dermatologist. This is a doctor who specializes in skin conditions. Physical Exam To check for varicose veins in your legs, your doctor will look at your legs while you're standing or sitting with your legs dangling. He or she may ask you about your signs and symptoms, including any pain you're having. Diagnostic Tests and Procedures Doppler Ultrasound Your doctor may recommend a Doppler ultrasound to check blood flow in your veins and to look for blood clots. A Doppler ultrasound uses sound waves to create pictures of structures in your body. During this test, a handheld device will be placed on your body and passed back and forth over the affected area. A computer will convert the sound waves into a picture of the blood flow in your arteries and veins. Angiogram Although rare, your doctor may order an angiogram to get a more detailed look at the blood flow through your blood vessels. For this procedure, dye is injected into your veins. The dye outlines your veins on x-ray images. An angiogram can help your doctor confirm whether you have varicose veins or another problem. Treatment Overview Varicose veins are treated with lifestyle changes and medical procedures. The goals of treatment are to relieve symptoms, prevent complications, and improve appearance. If your varicose veins cause few symptoms, your doctor may suggest simply making lifestyle changes. If your symptoms are more severe, your doctor may recommend one or more medical procedures. For example, you may need a medical procedure if you have significant pain, blood clots, or skin disorders as a result of your varicose veins. Some people who have varicose veins choose to have procedures to improve the appearance of their varicose veins. Although treatment can help existing varicose veins, it can't keep new varicose veins from forming. Back to Top Lifestyle Changes Lifestyle changes often are the first treatment for varicose veins. These changes can prevent varicose veins from getting worse, reduce pain, and delay other varicose veins from forming. Lifestyle changes include the following: Avoid standing or sitting for long periods without taking a break. When sitting, avoid crossing your legs. Raise your legs when sitting, resting, or sleeping. When you can, raise your legs above the level of your heart. Do physical activities to get your legs moving and improve muscle tone. This helps blood move through your veins. If you're overweight or obese, lose weight. This will improve blood flow and ease the pressure on your veins. Avoid wearing tight clothes, especially those that are tight around your waist, groin (upper thighs), and legs. Tight clothes can make varicose veins worse. Avoid wearing high heels for long periods. Lower heeled shoes can help tone your calf muscles. Toned muscles help blood move through the veins. Your doctor may recommend compression stockings. These stockings create gentle pressure up the leg. This pressure keeps blood from pooling and decreases swelling in the legs. There are three types of compression stockings. One type is support pantyhose. These offer the least amount of pressure. A second type is over-the-counter compression hose. These stockings give a little more pressure than support pantyhose. Over-the-counter compression hose are sold in medical supply stores and pharmacies. Prescription-strength compression hose are the third type of compression stockings. These stockings offer the greatest amount of pressure. They also are sold in medical supply stores and pharmacies. However, you need to be fitted for them in the store by a specially trained person. Procedures & Surgical Interventions Medical procedures are done either to remove varicose veins or to close them. Removing or closing varicose veins usually doesn't cause problems with blood flow because the blood starts moving through other veins. You may be treated with one or more of the procedures listed below. Common side effects right after most of these procedures include bruising, swelling, skin discoloration, and slight pain. The side effects are most severe with vein stripping and ligation (li-GA-shun). Although rare, this procedure can cause severe pain, infection, blood clots, and scarring. Sclerotherapy Sclerotherapy (SKLER-o-ther-a-pe) uses a liquid chemical to close off a varicose vein. The chemical is injected into the vein to cause irritation and scarring inside the vein. The irritation and scarring cause the vein to close off, and it fades away. This procedure often is used to treat smaller varicose veins and spider veins. It can be done in your doctor's office, while you stand. You may need several treatments to completely close off a vein. Treatments are typically done every 4 to 6 weeks. Following treatments, your legs will be wrapped in elastic bandaging to help healing and decrease swelling. Microsclerotherapy Microsclerotherapy (MI-kro-SKLER-o-ther-a-pe) is used to treat spider veins and other very small varicose veins. A small amount of liquid chemical is injected into a vein using a very fine needle. The chemical scars the inner lining of the vein, causing it to close off. Laser Surgery

This procedure applies light energy from a laser onto a varicose vein. The laser light makes the vein fade away. Laser surgery is mostly used to treat smaller varicose veins. No cutting or injection of chemicals is involved.

Endovenous Ablation Therapy Endovenous ablation (ab-LA-shun) therapy uses lasers or radiowaves to create heat to close off a varicose vein. Your doctor makes a tiny cut in your skin near the varicose vein. He or she then inserts a small tube called a catheter into the vein. A device at the tip of the tube heats up the inside of the vein and closes it off. You will be awake during this procedure, but your doctor will numb the area around the vein. You usually can go home the same day as the procedure. Endoscopic Vein Surgery For endoscopic (en-do-SKOP-ik) vein surgery, your doctor will make a small cut in your skin near a varicose vein. He or she then uses a tiny camera at the end of a thin tube to move through the vein. A surgical device at the end of the camera is used to close the vein. Endoscopic vein surgery usually is used only in severe cases when varicose veins are causing skin ulcers. After the procedure, you usually can return to your normal activities within a few weeks. Ambulatory Phlebectomy For ambulatory phlebectomy (fle-BEK-to-me), your doctor will make small cuts in your skin to remove small varicose veins. This procedure usually is done to remove the varicose veins closest to the surface of your skin. You will be awake during the procedure, but your doctor will numb the area around the vein. Usually, you can go home the same day that the procedure is done. Vein Stripping and Ligation Vein stripping and ligation typically is done only for severe cases of varicose veins. The procedure involves tying shut and removing the veins through small cuts in your skin. You will be given medicine to temporarily put you to sleep so you don't feel any pain during the procedure. Vein stripping and ligation usually is done as an outpatient procedure. The recovery time from the procedure is about 1 to 4 weeks. Limiting the Effects of Varicose Veins You can't prevent varicose veins from forming. However, you can prevent the ones you have from getting worse. You also can take steps to delay other varicose veins from forming: Avoid standing or sitting for long periods without taking a break. When sitting, avoid crossing your legs. Raise your legs when sitting, resting, or sleeping. When you can, raise your legs above the level of your heart. Do physical activities to get your legs moving and improve muscle tone. This helps blood move through your veins. If you're overweight or obese, lose weight. This will improve blood flow and ease the pressure on your veins. Avoid wearing tight clothes, especially those that are tight around your waist, groin (upper thighs), and legs. Tight clothes can make varicose veins worse. Avoid wearing high heels for long periods. Lower heeled shoes can help tone your calf muscles. Toned muscles help blood move through the veins. Wear compression stockings if your doctor advises you to. These stockings create gentle pressure up the leg. This pressure keeps blood from pooling in the veins and decreases swelling in the legs. Back to Top This page was adapted from content appearing on the The National Heart, Lung, and Blood Institute (NHLBI) website. "


what credit score do i need to use va home loan

In fact, one of the most common questions we receive is: Can I get a VA loan with bad credit? The answer isn’t black-and-white, in part because there’s no clear-cut definition of what “bad credit” actually means. For VA loans, borrowers will often need a FICO credit score of at least 620. But the VA doesn’t mandate a minimum score requirement, and credit score benchmarks can vary by lender. Some lenders may be willing to go below that common 620 cutoff, which is considered by some to be the dividing line between “Fair and subprime credit.

Veterans United Network VA Loans Insider Credit Can I Have Bad Credit and Still Get a VA Home Loan?by Chris Birk Published: May 26, 2017 140 Comments This post was inspired by VA Loans Insider reader Mary Ann Parker, who asked about securing VA financing with less than perfect credit.

The latter category is often regarded as “bad credit,” although ranges and definitions vary. If you want to use your VA home loan benefits to unlock the door to your dream home and your credit is standing in the way, Veterans United’s Lighthouse program can help you get on the right track. Credit Benchmarks for VA Loans The first issue is tackling nebulous phrases like “bad” or “less than perfect.” We use that kind of language because it can be so tough to discern what constitutes “good” credit, or at least a credit score that can get prospective buyers closer to the dream of homeownership.

The reality is there isn’t one credit score. Lenders will look at a range of scores — weighted a bit differently for the mortgage industry — from the different credit reporting agencies and generally focus on the middle ground. You can read more about what goes into different types of credit here.

For now, we’ll just focus on the bottom line: What kind of credit score do you need right now to move forward with the loan approval process? Current VA Lending Environment The VA doesn’t have a credit score requirement. Instead, the agency simply requires prospective borrowers to be considered a “satisfactory credit risk.” It defines the phrase a bit but it’s still rather wide open. Unsure about your credit situation? Let Us Help Determine Your Options→ Get in touch with a home loan specialist → Find out what you qualify for → 97% customer satisfaction But it’s also not the VA lending you money. The agency basically insures a portion of the mortgage. It’s VA-approved lenders who are on the hook for the bulk in the event of default.

They want to insulate themselves from risk as much as possible, and one way they do so is by requiring borrowers to hit a specific credit benchmark. In today’s lending climate, most VA lenders require a score of at least 620. If your spouse will be obligated on the loan, he or she will need to hit the same benchmark. The average FICO score for VA borrowers is 709, compared to 750 to 770 scores for conventional loans backed by Fannie Mae and Freddie Mac, respectively, according to syndicated columnist Ken Harney.

Less Than Perfect? So what about Mary Ann’s question? It really depends on how you define “shaky” or “less than perfect” credit.

You can certainly have blemishes on your credit report and maintain at least a 620 score. You can even have a history of bankruptcy or foreclosure and still obtain a VA loan. But right now, in most cases, you’re going to need a credit score of at least 620 in order to secure financing.

If you need help boosting your score, check out our Lighthouse Program, a unique arm of Veterans United that works with service members to overcome financial challenges and get on the path to loan prequalification. Check your VA Loan eligibility here →Photo courtesy of Moyen_Brenn Tweet


what type of areas do rattlesnakes live in

e. Although it is commonly believed that diamondbacks and timber rattlesnakes live in the Pacific Northwest, the only indigenous species in the region is the western rattlesnake ( Crotalus oreganus ). These wide-ranging reptiles are found in dry, rocky regions west of the Continental Divide, from Mexico to Canada.

Rattlesnakes in Oregon

The rattlesnake is the only dangerously venomous reptile in Oregon. Among the state's native wildlife, few other animals generate as many fears, false perceptions, and tall tales. In reality, however, few people see rattlesnakes in the wild. They want to be left alone and will never advance toward a human. Even when cornered, a defensively coiled rattlesnake can strike outward with just the forward half of its body. Anyone six feet or more away is well outside biting rang

They are relatively small, averaging about thirty inches in length, with occasional individuals reaching forty-eight inches. Rarely, sixty-inch specimens have been documented. Western rattlesnakes blend well with the environment. In forested areas, they are dark with large blotches; in open deserts and prairies, their coloring is lighter with smaller blotches. Several geographic variations are classified as different subspecies, with two occurring in Oregon. The brown to greenish-brown Northern Pacific rattlesnake ( Crotalus oreganus oreganus) has large, squarish blotches. In western Oregon, they occupy oak habitats in the Klamath/Siskiyou Mountains and the Rogue River, Umpqua, and Willamette Valleys. In central and northeastern Oregon, they live in sun-drenched pine and juniper woodlands. The other subspecies is the Great Basin rattlesnake ( Crotalus oreganus lutosus ), which is native to the deserts and sagebrush steppelands in southeastern Oregon. Their buff-tan coloring and small, oval blotches match the arid surroundings there. The ranges of these two subspecific variations meet along an arc that stretches northeastward from Klamath Falls, through Burns, to the Snake River near Baker City. Within that zone, all rattlesnakes have a blending of characteristics of both subspecies. Generally, rattlesnakes do not live in Oregon's mountains above 6,000 feet, and the climate is too cloudy and wet for them along the coast. At northerly latitudes, rattlesnakes hibernate communally through the winter on south-facing slopes. In autumn, as conditions become colder, they congregate at rocky dens and retreat into deep crevices. When springtime warmth arrives, they emerge and disperse into the surrounding area for the summer. It is a common misconception that a rattlesnake's age can be determined by counting its loosely interlocking rattle segments. Actually, a new segment is added at the base of the rattle each time it sheds its skin, and a rattlesnake sometimes casts its epidermis more than once a year. As the rattle becomes longer and more fragile, some of the segments break off. A rattlesnake's fangs are connected to glands on each side of the animal's broad head, efficiently injecting venom for both defense and the killing of food. Rattlesnakes are pit vipers, with a small heat-sensing indention on each side of their snout that detects warm-blooded prey for better striking accuracy in the dark. If a person is bitten by a rattlesnake, the current recommendation is to quickly find medical care for antivenom treatment rather than administering first aid. Even though rattlesnakes eat rodents and are a benefit to farmers, they are not winning popularity contests. In densely populated western Oregon, rattlesnake populations are declining because of extermination efforts—for example, dynamiting their dens—and habitat loss. Historically, rattlesnakes in the Willamette Valley inhabited areas with rocky hillsides, from Cottage Grove northward nearly to Portland. During the 1850s, the Bush Park neighborhood in Salem was known as Rattlesnake Hill. Now, rattlesnakes survive in a few southern sections of the valley, being extirpated from their former territories in Benton, Polk, Yamhill, and Clackamas Counties.


words to church song peace peace

s Peace, peace, peace - The gift of Christ is peace. We walk with God, our past forgiven. All in Him is life and heaven. Peace, peace, peace - The gift of Christ is peace. Hope, hope, hope - The light of Christ is hope. In all our darkness Christ is shining, Leading upward, faith refining.

Peace, Peace, Peace May I Copy this Hymn? If navigation buttons (save, print, etc.) don’t appear above the pdf of the music, right click, or scroll to the bottom of the pdf and hover. If the pdf fails to appear below, click here to open it directly. You will need Adobe Reader to open it. It appears your Web browser is not configured to display PDF files. No worries, just click here to download the PDF file. Listen Your browser does not support the audio element. Click here for downloading details Lyric

Hope, hope, hope - The light of Christ is hope. Love, love, love - The heart of Christ is love. On all who come He pours His presence, Life and love in holy essence. Love, love, love - The heart of Christ is love. Joy, joy, joy - We praise You, Christ, with joy! Our peace, our hope, our love and treasure, Highest calling, deepest pleasure! Joy, joy, joy - We praise You, Christ, with joy!Words by Ken Bible Music: Traditional Austrian Melody; arr. by Ken Bible © 2006 by LNWhymns.com. CCLI Song #4663940. Tune STILL, STILL, STILL with meter 3.6.9.8.3.6. Topics Advent Assurance & Comfort Christmas Folk Tunes God's Love Living in Christ Peace in Christ Scriptures Psalm 85:1-2, 8-13Isaiah 2:1-5Isaiah 11:1-10Isaiah 35:1-10Isaiah 40:1-11Isaiah 61:1-4, 8-11Micah 5:2-5a Zephaniah 3:14-20Luke 1:68-79Romans 5:1-11Romans 15:4-13Philippians 4:4-7