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Estimation of cost-effectiveness of poplar wood production in poplar plantations in Ravni Srem based on the method of pay back period

Author(s): Keča Ljiljana

Journal: Glasnik Šumarskog Fakulteta
ISSN 0353-4537

Volume: 2011;
Issue: 103;
Start page: 41;
Date: 2011;
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Keywords: pay back period | plantations | poplar | receipts | costs | commercial profitability | estimation | forest policy

Poplar plantations are a category of fixed assets in forestry, i.e. the assets with a biological character. They are related to their site, they are cultivated for a relatively long time and they have a relatively long utilization cycle, with the yield development determined by the plantation growth and age. Plantations transfer their value gradually to the obtained products during the period of their harvesting, and, by the realization of the products, the means invested in the plantation establishment are reproduced. The period of investments in poplar growing can be relatively long, and so is the period of harvesting. Therefore, it is important to determine the time of the return of the capital invested in these and similar plantations. This paper presents the analysis of commercial profitability of poplar cultivation according to the indicator for the assessment of projects in agriculture and forestry - pay back period. The application of pay back period (PBP) calculation can affect greatly the reliability of predicting the degree of economic effectiveness of investments, and also the potential risks for the investor in his decisions on the investments in poplar cultivation. The analysis of poplar clone I-214 plantations was carried out in the area of Ravni Srem, under different rotations and soil types. Based on the analysis of costs and receipts in different plantation ages, and using the method of pay back period, the objective of the study was to evaluate the possible pay back period of invested capital in wood production in poplar plantations. PBP is practically unacceptable by the investor under the discount rate of 6%. The most favorable situation is in the youngest stands, using the discount rate of 2%. The situation regarding the pay back period in the over-aged stands is utterly unfavorable, so the credit cannot be repaid under any conditions. This fact supports the idea that the production cycle length should be shortened.
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