DCF return on investment a combined effort between the development engineer
and the company’s finance specialist. The development engineer provides the
technical input to the work such as operating costs, type of plants, construction
schedules and cost, yield, refinery fence product prices, and the like. While the
financial specialist provides the financial data based on statutory and company
policies, such as the form of depreciation, tax exemptions, tax credits (if any),
items forming part of the company’s financial strategy, etc., the calculation itself is
in two parts, which are:
• Calculation of cash flow
• Present worth calculation
These are described in the following paragraphs.
Calculating Cash Flow
Figure 9 gives a graph of the cumulative cash flow of a typical project in relation to
its project life.
Initially, there is a financial loss when the company has to purchase land and
equipment, pay contractors to erect equipment, and the like. To do this, not unlike
Fig. 9 A diagram of cumulative cash flow
Petroleum Refinery Planning and Economics
729