In the present work, we focus on noise generation by a flapping foil used for small ship and AUV propulsion and its propagation in the inhomogeneous sea environment. The pressure field and the forces produced by flapping thruster motion, obtained by a BEM model, are used to calculate the dipole and monopole terms associated with the initial - boundary value problem governed by the wave equation. Initially, an acoustic model in free space based on the Farassat formulation is derived. Subsequently, the latter is extended to account for a bounded domain and an inhomogeneous medium. For simplicity, the 2D sea acoustic waveguide is considered, and the presented numerical method is based on a Finite Difference scheme (FDM), incorporating free-surface and seabed effects as well as a variable sound speed profile. Moreover, the numerical scheme is supplemented by a perfectly matched layer (PML) for the treatment of the outgoing radiating field behavior in the open boundaries. Numerical results are presented for the verification of the present method in the case of time-harmonic sources. Future extensions are discussed regarding the application of a Finite Element Method (FEM) - PML scheme to treat localized scatterers and curved boundaries as well as 3D effects.