Small-scale Forestry

, Volume 15, Issue 4, pp 463–479

Financial Evaluation of Forestry Investments: Common Pitfalls and Guidelines for Better Analyses

Research Paper

Abstract

Many of the papers submitted to Small-scale Forestry contain financial analyses of forestry investments. Unfortunately, both the method of analysis and the reporting of the analysis in initial submissions are often inadequate, and result in manuscripts being rejected or requiring major revision prior to acceptance. This paper discusses some of the common deficiencies in financial analyses in research papers, and presents a simplified financial analysis of a forestry plantation development to illustrate key points. Simple guidelines are presented to overcome common major weaknesses, for example in identifying relevant cash flows, confusion between financial and economic analysis, dealing with capital outlays, and determining an appropriate discount rate.

Keywords

Forestry financial analysis Plantation costs and returns Relevant cash flows Weighted average cost of capital Current versus constant prices Sunk costs 

Copyright information

© Steve Harrison, John Herbohn 2016

Authors and Affiliations

  1. 1.Tropical Forests and People Research CentreUniversity of the Sunshine CoastMaroochydoreAustralia
  2. 2.School of Agriculture and Food SciencesThe University of QueenslandBrisbaneAustralia

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