Development of Farm Forestry Financial Models in Australia

An integral component of planning investment in forestry is the need for financial information about the likely cash flows associated with the establishment, management and final harvest of a plantation. Financial models provide a useful framework for the assessment of financial performance of forestry. A number of generic forestry financial models have been developed in recent years in Australia and New Zealand. A financial model is a tool that aids in the assessment of forestry projects, providing the means through which financial performance measures such as net present value (NPV), land expectation value (LEV) and internal rate of return (IRR) are calculated. Outputs of financial models should however be interpreted with caution. The usefulness and accuracy of these output parameters are much dependent on the accuracy of information provided by model users. The chapter provides some background to the development of financial models for farm forestry and reviews a range of models that are currently available in Australia.