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Free Cash Flow () for each year is defined as (the year index "I" is omitted):FCF 
LaTeX Math Block
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\mbox{NPV} =  - \mbox{I}_0 + \sum_{i=1}^n \frac{\mbox{FCF}_i}{(1+r)^i}
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\mbox{PI} =  \frac{1}{ \mbox{I}_0 } \cdot \sum_{i=1}^n \frac{\mbox{FCF}_i}{(1+r)^i}

FCF

 = (

Sales − COGS − OPEX − Interest)  · ( 1 − IncomeTaxRate) + CAPEX

Sales = q1 · Priceincome

Priceincome =  Taxmining · Pricemarket

COGS =  qO↑ · CO  + qG↑ · CG↑  + qW↑ · CW↑  + qW↓ · CW↓

Sales = q1 · Priceincome 

Priceincome =  Taxmining · Pricemarket

where

FCF

Free Cash Flow for each year (with year index "

LaTeX Math Inline
body_i
" omitted)

Sales
COGS
OPEX
CAPEX
Interest
IncomeTaxRate
Taxmining
Pricemarket
 Priceincome 
q1



The link between the above FCF algorithm and the general principals of P&L is given below:

FCF = OCF + CAPEX
OCF = Net Income =  EBT  · ( 1 − IncomeTaxRate)
EBT = EBIT − Interest
EBIT = Sales − COGS − OPEX


See also

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Petroleum Industry / Upstream /  Production / Field Development Plan

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