Three Approaches for Forest Capital Valuation

Abstract

In this paper, three approaches for forest capital valuation are discussed. The first approach is a profit-based approach, where capital value is estimated in terms of the product of the average lifetime of capital and annual profit from capital. The second one is a cost-based approach with a use of costs inherited to forest productivity. Capital value in the second approach is the product of the average lifetime of a forest (or average rotation age) and annual costs. For the second approach, we compare these methodologies to estimate forest productivity based on the widely defined concept of normal forests and Hirata’s concept. As the last approach, we propose a new capital valuation approach by incorporating fuzzy phenomena on nature or economy into Hirata’s cost-based capital concept. The proposed approach is characterized by combining valuations derived from the two viewpoints of planning and fluctuation.