Preprint Article Version 1 This version is not peer-reviewed

Wealth Accumulation in Rotation Forestry – Failure of the Net Present Value Optimization?

Version 1 : Received: 17 January 2019 / Approved: 21 January 2019 / Online: 21 January 2019 (07:28:01 CET)

How to cite: Kärenlampi, P.P. Wealth Accumulation in Rotation Forestry – Failure of the Net Present Value Optimization?. Preprints 2019, 2019010194 (doi: 10.20944/preprints201901.0194.v1). Kärenlampi, P.P. Wealth Accumulation in Rotation Forestry – Failure of the Net Present Value Optimization?. Preprints 2019, 2019010194 (doi: 10.20944/preprints201901.0194.v1).

Abstract

We investigate wealth accumulation in forestry, assuming that revenues are re-invested. Three different optimization criteria are compared, two of which are based on cash flows, the third financially grounded. Direct optimization of wealth appreciation rate always yields best results. Procedures gained by maximizing internal rate of return are only slightly inferior. With external discounting interest rate, the maximization of net present value yields arbitrary results, with at worst devastating financial consequences.

Subject Areas

capital return; real estate; capitalization

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