The Effect of Real Price Changes on the Valuation of Timber Plantations

Abstract

SYNOPSIS The well-established method which is applied in South Africa to determine the value of timber plantations ignores real or relative price changes. The omission of real price changes from a plantation valuation can seriously understate or overstate the true value of a plantation. This paper shows, by means of an example, the potential differences which can occur between plantation values obtained according to the hitherto generally accepted method and those obtained according to a method which takes account of real price changes.