Infinite planning horizon, land opportunity cost and Faustmann methodology
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| Format: | Artículo científico |
| Language: | en |
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Universidade Federal de Lavras
2005
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| _version_ | 1866814442455433216 |
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| author | Luiz Moreira Coelho |
| author_facet | Luiz Moreira Coelho |
| contents | Infinite planning horizon, land opportunity cost and Faustmann methodology Luiz Moreira Coelho José Luiz Pereira de Rezende Antônio Donizette de Oliveira Agrociencias Faustmann method economic analysis project evaluation land expectation value The paper studied and discussed The Faustmann Method (Land Expected Value - LEV) comparing it with The NetDiscounted Value project evaluation criterion, in an infinite horizon (NDV ). The method was applied for determining land value,envisaging eucalyptus plantation in savannah area (cerrado) in Brazil, for the purpose of charcoal production. For the same situationthe Net Discounted Value was applied and compared. The costs considered were establishment, maintenance and harvesting and thatthe forest was managed with the substitution being done after cutting the original establishment at seven years of age, that is, there isno coppicing transport. The substitution cost was considered equal to that of establishment. The only income considered was the saleof the wood produced for energy (250 st/ha) at the price of US$ 7.10/st in the cutting age. The main conclusions were: For anydiscount rate, LEV is always a larger value than NDV , because NDV considers land in the relationship of costs; the assumption thatland only has value for wood production, implied by Faustmann methodology, doesn t have theoretical nor practical support; if thereis no alternative for land use, then its opportunity cost is zero and there would be no reason to determine its value; land productivevalue is not the only value that enters in the formation of its price. The Faustmann methodology doesn t capture the other factors thataffect land price, for instance, the speculative effects, cultural values, land protective value, protection against inflation and of statusattribution, etc..; LEV indicates how much can be spent in any cost item left out of the calculations 2005 artículo científico 0104-7760 https://www.redalyc.org/articulo.oa?id=74411201 en http://www.redalyc.org/revista.oa?id=744 CERNE application/pdf Universidade Federal de Lavras CERNE (Brasil) Num.2 Vol.11 |
| format | Artículo científico |
| id | redalyc_74411201 |
| language | en |
| publishDate | 2005 |
| publisher | Universidade Federal de Lavras |
| spellingShingle | Infinite planning horizon, land opportunity cost and Faustmann methodology Luiz Moreira Coelho Agrociencias Faustmann method economic analysis project evaluation land expectation value Infinite planning horizon, land opportunity cost and Faustmann methodology Luiz Moreira Coelho José Luiz Pereira de Rezende Antônio Donizette de Oliveira Agrociencias Faustmann method economic analysis project evaluation land expectation value The paper studied and discussed The Faustmann Method (Land Expected Value - LEV) comparing it with The NetDiscounted Value project evaluation criterion, in an infinite horizon (NDV ). The method was applied for determining land value,envisaging eucalyptus plantation in savannah area (cerrado) in Brazil, for the purpose of charcoal production. For the same situationthe Net Discounted Value was applied and compared. The costs considered were establishment, maintenance and harvesting and thatthe forest was managed with the substitution being done after cutting the original establishment at seven years of age, that is, there isno coppicing transport. The substitution cost was considered equal to that of establishment. The only income considered was the saleof the wood produced for energy (250 st/ha) at the price of US$ 7.10/st in the cutting age. The main conclusions were: For anydiscount rate, LEV is always a larger value than NDV , because NDV considers land in the relationship of costs; the assumption thatland only has value for wood production, implied by Faustmann methodology, doesn t have theoretical nor practical support; if thereis no alternative for land use, then its opportunity cost is zero and there would be no reason to determine its value; land productivevalue is not the only value that enters in the formation of its price. The Faustmann methodology doesn t capture the other factors thataffect land price, for instance, the speculative effects, cultural values, land protective value, protection against inflation and of statusattribution, etc..; LEV indicates how much can be spent in any cost item left out of the calculations 2005 artículo científico 0104-7760 https://www.redalyc.org/articulo.oa?id=74411201 en http://www.redalyc.org/revista.oa?id=744 CERNE application/pdf Universidade Federal de Lavras CERNE (Brasil) Num.2 Vol.11 |
| title | Infinite planning horizon, land opportunity cost and Faustmann methodology |
| topic | Agrociencias Faustmann method economic analysis project evaluation land expectation value |
| url | https://www.redalyc.org/articulo.oa?id=74411201 |