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→Discounted cash flow rate of return
==Discounted cash flow rate of return==
==Discounted cash flow rate of return==
[[file:key-economic-parameters_fig1.png|left|thumb|{{figure number|1}}Present value profile and determination of DCFROR for example development well and example multiwell extension project.]]
[[file:key-economic-parameters_fig1.png|300px|thumb|{{figure number|1}}Present value profile and determination of DCFROR for example development well and example multiwell extension project.]]
''Discounted cash flow rate of return'' (DCFROR), or internal rate of return, is calculated by a trial-and-error method. In this method, different discount rates—and thus present value (PV) factors—are inserted in the cash flow model to yield a series of NPVs, beginning with a discount rate of zero (equals undiscounted net cash flow stream). For project cash flows, such as our two examples, the cumulative NPV of a project will decline with successively higher discount rates ([[:file:key-economic-parameters_fig1.png|Figure 1]]). The point at which the declining curve intersects the zero present value line corresponds to the DCFROR of the project. For complex projects involving subsequent [[enhanced oil recovery]] additions, the resulting dual rate problem may generate more than one DCFROR.
''Discounted cash flow rate of return'' (DCFROR), or internal rate of return, is calculated by a trial-and-error method. In this method, different discount rates—and thus present value (PV) factors—are inserted in the cash flow model to yield a series of NPVs, beginning with a discount rate of zero (equals undiscounted net cash flow stream). For project cash flows, such as our two examples, the cumulative NPV of a project will decline with successively higher discount rates ([[:file:key-economic-parameters_fig1.png|Figure 1]]). The point at which the declining curve intersects the zero present value line corresponds to the DCFROR of the project. For complex projects involving subsequent [[enhanced oil recovery]] additions, the resulting dual rate problem may generate more than one DCFROR.