FOREST ECONOMICS

Basic concept
 Forest economics defined as the application of economic principles to forestry's management and
decision making problems.
 Forest valuation refers to the estimation of the value of forest property.
 Cost value, income value and market value are the basis for valuation.
 Forest man obtained the soil expectation value based on the assessment of the output from the forest.
 Soil expectation value refers to the discounted present value of the future returns from a property mines
the discontinued present value of the all future expense necessory to earn these returns the discounting
done at given rate of interest at compound interest.
 Soil expectation value (Se) = X /0.0p X= Income (Rs)
Measures to assess the project worth
 Benefits of cost ratio are the ratio of the benefit to the cost.
 The project is worthy when the BCR value is more than one.
 BCR =present worth of benefits / present worth of cost.
 Present net worth or net present value is the difference between the present worth of benefit and present
worth of cost.
 The project is worthy when the NPV should be greater than zero.
 An internal rate of returns IRR refers to the rate at which present worth of benefits is equals to the
present worth of cost.
 The project is worthy when IRR should be higher than the rate of the interest.
 Benefit-cost analysis is the technique of estimating the cost and returns from production.
 Price spread is the price difference between the prices at producer level to the price at a consumer level
for unit quantity of produce.
 Monopoly means a single seller or few sellers in market.
 Oligopoly means many sellers
 Monospony means few buyers
 Oligospony means many buyers
 The internal rate of return (IRR) is a metric used in financial analysis to estimate the profitability of
potential investments. IRR is a discount rate that makes the net present value (NPV) of all cash flows
equal to zero in a discounted cash flow analysis.
 Marginal Return is the rate of return for a marginal increase in investment; roughly, this is the
additional output resulting from a one-unit increase in the use of a variable input, while other inputs are
constant.
 Opportunity cost is the value of the next-best alternative when a decision is made; it's what is given up.
 A shadow price is an estimated price for something that is not normally priced or sold in the market.
Shadow pricing can provide businesses with a better understanding of the costs and benefits associated
with a project
 Ex-ante analysis: The evaluation of the merits of a proposed project before implementation
 Ex-post analysis: The evaluation of completed project
 Financial analysis: It examines the feasibility of the undertaking from the private or individuals point
of view
 Net present value is the present value of the cash flows at the required rate of return of your project
compared to your initial investment,

Ganesha B H College of Forestry, Sirsi, University of Agricultural Sciences Bangalore