Forest Investment Account

Abstract of FII Project R2003-242

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Economic tradeoffs of timber tenures for small forestry businesses

Author(s): Herath, Hemantha; Jahera, John; University of Northern British Columbia
Imprint: Prince George, B.C. : University of Northern British Columbia, 2003
Subject: Timber, Economic Aspects, British Columbia
Series: Forest Investment Account (FIA) - Forest Science Program


A primary challenge for small forestry businesses is determining the value of forest investment opportunities. In this paper, we illustrate how small forest businesses can use real option analysis to exploit uncertainty in timber prices to determine the market value of forest licenses. In addition, we develop an option based valuation model that takes into account the economic trade-offs between short-term and long-term tenure arrangements when there is lumber price uncertainty.
Hemantha Herath, John Jahera Jr.

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Updated August 02, 2006 

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