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Abstract
Faustmann’s formula is often used by forest economists but some landowners ignore the time value of money and rely primarily on some type of cashflow analysis. A cashflow method was used by “estate owners” like kings, land barons, and governments. We coin the term “estate owner’s method” to describe one version of cashflow analysis. This approach can be used for either a “fully regulated forest” or for a forest that is harvested using the single-tree method. When calculating a return on investment, all past investments are “sunk” and all future returns and investments are ignored. Only costs and revenue realized during the current year are considered. This method is occasionally used by some large landowners to justify long rotations. Long rotations are easier to justify when time value of money is ignored or when the interest rate is close to zero.
Parent Publication
Citation
South, David B.; Laband, David N. 2013. The estate owner’s approach to forest economics. In: Guldin, James M., ed. 2013. Proceedings of the 15th biennial southern silvicultural research conference. e-Gen. Tech. Rep. SRS-GTR-175. Asheville, NC: U.S. Department of Agriculture, Forest Service, Southern Research Station. 169-174.
