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Estimating annual investment returns from forestry and agriculture in New Zealand

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  • Evison, David C.

Abstract

This paper describes a method of estimating annual investment returns from forest growing businesses in New Zealand, using financial statement data. The method is also applied to survey data (derived from farm financial statements) published by New Zealand pastoral farming sector organisations. After data are adjusted for inflation, the total investment return is calculated as the sum of the cash return on assets, and the percentage change in asset value. The paper demonstrates that the total investment return calculated in this way is equivalent to the internal rate of return (IRR), for a single period of one year. The direct equivalence between this measure and the single-period IRR (calculated using discounted cash-flow analysis) is demonstrated algebraically and by example.

Suggested Citation

  • Evison, David C., 2018. "Estimating annual investment returns from forestry and agriculture in New Zealand," Journal of Forest Economics, Elsevier, vol. 33(C), pages 105-111.
    • Handle: RePEc:eee:foreco:v:33:y:2018:i:c:p:105-111
    DOI: 10.1016/j.jfe.2018.06.001
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    References listed on IDEAS

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    1. Evison, David, 2014. "The use of internal rate of return as a tool for evaluating and comparing investment performance," 2014 Conference, August 28-29, 2014, Nelson, New Zealand 201087, New Zealand Agricultural and Resource Economics Society.
    2. Ibbotson, Roger G & Sinquefield, Rex A, 1976. "Stocks, Bonds, Bills, and Inflation: Year-by-Year Historical Returns (1926-1974)," The Journal of Business, University of Chicago Press, vol. 49(1), pages 11-47, January.
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    Cited by:

    1. Jeanneaux, Philippe & Piet, Laurent, 2024. "Farmers' trade-off strategies between investment and private withdrawals, and the profitability of invested capital," Working Papers 339873, Institut National de la recherche Agronomique (INRA), Departement Sciences Sociales, Agriculture et Alimentation, Espace et Environnement (SAE2).

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    More about this item

    Keywords

    Forestry; Agriculture; Investment; Investment return; Financial statements; Internal rate of return;
    All these keywords.

    JEL classification:

    • B41 - Schools of Economic Thought and Methodology - - Economic Methodology - - - Economic Methodology
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics
    • Q23 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Forestry
    • Q14 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Finance
    • R14 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Land Use Patterns

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