Current issue: 54(2)
The result of forest valuation depends heavily on the interest rate and hence determining the rate of interest for forest is the one of the most important tasks of forest valuation.
When defining the interest rate for forests, we need to take into account not only the common interest rate in the country, but also other factors. Those are for example the increase in timber price. By calculating the land expectation value we assume that costs for felling, regeneration and other management will rise by same percent.
The article presents the common formula of land expectation value and discusses its pros and cons. Because of the bad condition of Finnish forests, the forest valuation has not been used widely in practice and hence also the research on theme has been minor. The development of the forests in future will make the theme more relevant.
The volume 34 of Acta Forestalia Fennica is a jubileum publication of professor Aimo Kaarlo Cajander.
Length of the regeneration period is a criterion commonly used for comparing different reforestation methods. The time factor should be evaluated using a realistic system for long-term planning. In this paper the preliminary evaluation is made by simplified calculations based on the development series. The slow regeneration method is assumed to be otherwise equal to the rapid one but it has a 5- or 10-years delay at the beginning, and the rotation is thus the final cutting age plus 5- or 10-years delay. Cost of the time delay is taken to be the difference in reforestation costs that makes the rapid and the slow methods equivalent. Calculations are made using zero costs for the slow method; but if the cost of the slow method increases, the critical cost difference decreases very slowly. The final cutting age and the regeneration method must be decided simultaneously. Therefore, the cost of the time delay is presented as a function of final cutting age. By maximizing the average annual revenue, rotation can be even increased if more rapid but more expensive regeneration method is used.
The PDF includes a summary in English.
The role of the time factor is discussed from the viewpoint that investment calculations are expected to be used to transform and condense information and not necessarily to show the optimum. Some general conclusions are drawn concerning the recommendable form of such a calculation when used by a consultant advising a forest owner. A few of the practical problems arising in the connection of applications to timber growing are also discussed.
In conclusion, a recommendation was developed for the calculation procedure to be used in the so-called contractual research into the profitability sequence of forest improvements. It would seem advisable to carry out the calculations using both varying interest rates and varying time horizons. In addition, it is justifiable also to present the expected series of cash flow changes, such as they are, among the results. Further studies will follow.
The PDF includes a summary in Finnish.