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Soil Expectation Value (SEV)

Soil Expectation Value (SEV). Financial criteria used to make even-aged timber management decisions. Simply the year zero value of a perpetual series of even-aged rotations Also known as Faustman formula. Net Present Value (NPV) for a Single Rotation.

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Soil Expectation Value (SEV)

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  1. Soil Expectation Value (SEV) • Financial criteria used to make even-aged timber management decisions. • Simply the year zero value of a perpetual series of even-aged rotations • Also known as Faustman formula

  2. Net Present Value (NPV) for a Single Rotation • NPV may include the initial cost of land and land value at time r where, Nt = net cash flow in year t (Rt - Ct) Rt = revenue in year t Ct = expenditure year t n = r = rotation length i = discount rate

  3. SEV timeline PV1 1st rotation PV2 2nd rotation PV3 3rd rotation PVn nth rotation PV0 of perpetual series PV1 = PV2 = PV3=………PVn

  4. Soil Expectation Value (SEV) r ∑ (Rt-Ct) (1+i)r-t t = 0 SEV = (1+i)r - 1 where, r = rotation length in years, i = discount rate t = index on year” 0, 1, 2, . . . r Rt = revenues in tth year Ct = expenditures in tth year

  5. Example

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