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Financial Analysis for Forest Financial Analysis for Forest yResource Managers
yResource Managers
J O’L hli Ph DJay O’Laughlin, Ph.D.Professor of Forestry & Policy Sciences
Director of the Policy Analysis GroupC ll f N t l RCollege of Natural Resources
University of Idaho(208) 885-5776; [email protected]
www
Handout – Outline & Example Problems
NOTE: Revised version, Feb. 13, 2012
Handouts – References
Handouts – References
O’Laughlin & Cook (2001, p. 3)
Handouts – Process Diagram & Formulae
OUTLINE
OUTLINE
Financial analysis step-by-step
Most Difficult
More Difficult
E iEasier
OUTLINE
Forestry investment return components
Timber growth
Forestry investment return components
Timber growthStumpage price increaseStumpage price increase
Douglas-fir, average Puget Sound region prices, 1970 2004 (adjusted for inflation in 2002 dollars)1970-2004 (adjusted for inflation in 2002 dollars).
Zobrist (2005, p. 9)
Forestry investment return components
Timber growthStumpage price increaseStumpage price increaseLand value increaseLand value for growing timber may be calculated using a compound interest formula. Increasing that value for future land use change is highly speculative and problematic.
The Land Expectation Value (LEV) represents the maximum additional outlay that could be made at the beginning of the rotation for the actual purchase of the land while still earning p gthe target rate of return on the total investment. Thus LEV is also considered the maximum willingness to pay for land for forestry use given management expectations (Zobrist 2005, p.7).
OUTLINE
Formulae . . .
Financial calculator . . .
Spreadsheet . . .
OUTLINE
Examples: Site index 70
Yield table: naturally generated
Yield table: naturally generated
Yield table(s): Douglas-fir plantations
2. The landowner has an objective to maximize long-term financial returns from sustainable timber management She has heard thatmanagement. She has heard that Douglas-fir plantation manage-ment may be a good choice. After calculating the tree growthAfter calculating the tree growth rates for the four management alternatives (Sheets 3-6) and assuming a final harvest in year g y80, which alternative may be best? Sheet ____
Yield table(s): Douglas-fir plantations
2. The landowner has an objective to maximize long-term financial returns from sustainable timber management She has heard thatmanagement. She has heard that Douglas-fir plantation manage-ment may be a good choice. After calculating the tree growthAfter calculating the tree growth rates for the four management alternatives (Sheets 3-6) and assuming a final harvest in year g y80, which alternative may be best? Sheet ____
Yield table(s): Douglas-fir plantations
2. The landowner has an objective to maximize long-term financial returns from sustainable timber management She has heard thatmanagement. She has heard that Douglas-fir plantation manage-ment may be a good choice. After calculating the tree growthAfter calculating the tree growth rates for the four management alternatives (Sheets 3-6) and assuming a final harvest in year g y80, which alternative may be best? Sheet ____
Yield table(s): Douglas-fir plantations
2. The landowner has an objective to maximize long-term financial returns from sustainable timber management She has heard thatmanagement. She has heard that Douglas-fir plantation manage-ment may be a good choice. After calculating the tree growthAfter calculating the tree growth rates for the four management alternatives (Sheets 3-6) and assuming a final harvest in year g y80, which alternative may be best? Sheet ____
OUTLINE
Land and timber valuation
Zobrist (2005, p. 7)
Land Expectation Value (LEV = SEV)
Zobrist (2005, p. 7)
Formulae . . .
Problem 3 . . .
Problem 3 . . .
Problem 3 . . .
Zobrist (2005, p. 10)
OUTLINE
Problem 4 . . .
OUTLINE
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Financial Analysis for Forest Financial Analysis for Forest yResource Managers
yResource Managers
J O’L hli Ph DJay O’Laughlin, Ph.D.Professor of Forestry & Policy Sciences
Director of the Policy Analysis GroupC ll f N t l RCollege of Natural Resources
University of Idaho(208) 885-5776; [email protected]
www
