Tax Net Cash Flow

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Evaluation Methods T W O CONTENTS 1. 2. 3. 4. 5. 6. INTRODUCTION 1.1. Assets BOOK VALUE METHOD 2.1. Depreciation Schemes 2.2. Application of Book Value MARKET VALUE CASH FLOW METHOD 4.1. Project Cash Flows 4.2. Cash Flow Models UPSTREAM PETROLEUM PROJECTS 5.1. Production Profiles 5.2. Production and Revenue 5.3. Project Capex 5.4. Project Opex 5.5. Project Taxation FOINAVEN CASH FLOWS R E Petroleum Economics reservoir evaluation and management M R E M Petroleum Economics LEARNING OBJECTIVES: Having worked through this chapter the student will be able to: Definition of an asset 1. Define an “asset” 2. List different types of assets Evaluation concepts and objectives 3. Identify and explain the three important valuation concepts 4. List several business situations where evaluation is required Book value 5. Define the concepts of “depreciation” and “book value” 6. Calculate depreciation using the following methods: Straight line Declining balance Units of production 7. List applications of the book value method 8. Explain the impact of inflation on the book value method 9. Explain the book valuation of exploration drilling and subsurface reserves Market value 10. List the factors which contribute to the quality of a market valuation 11. Describe and explain the structure and behaviour of a simple market model 12. Explain the behaviour of the market for mobile drilling rigs Cash flow concept 13. Define “cash flow” and “incremental cash flow” 14. List and explain the characteristics of a cash flow 15. List different types of cash flow; differentiate between “capex” and “opex” Cash flow models 16. Describe the general nature of the cash flow associated with a project 17. Explain the following parameters of a cash flow model: Model origin Model time period

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