Capital Budgeting Applied to Serbian Poplar Plantations

Abstract

Background and Purpose: Capital budgeting is the process in which a business determines and evaluates potential large
expenses or investments. These expenditures and investments include projects such as building a new plant or investing in
a long-term venture. In the case of poplar plantations in Serbia, a prospective project's lifetime cash inflows and outflows
can be assessed in order to determine whether generated potential returns meet a sufficient target benchmark, also known
as "investment appraisal". The purpose of this study is to show relative profitability of alternative courses of action in
poplar plantations.
Material and Methods: The investigated plantations were established from Populus x euramericana cl. I-214 on different
soil types, situated in north-western part of Serbia, with planting spacing 6x3 m, differently aged, mainly for technical wood
production. The data used in this study were collected from the management and materials books of the "Vojvodinašume"
Public Forest Enterprise , which is the official owner of these stands. All of the plantations are state-owned. At the end the
supply chain of poplar wood production is presented. Different capital budgeting techniques and different discount rates
are employed to determine which types of poplar plantations, treated as separate projects, will or not will yield the most
return over an applicable period of time.
Results and Conclusions: The financial effects for sample plot plantations were first evaluated with an external funder
prerequisite of 12% discount rate, and continued with different investment appraisal discount rates. For the discount rate
r=12%, all tested areas had a negative net present value (NPV). Average internal rate of return (IRR) is 5.63% and payback
period is acceptable for the investor at 6% and less. The average benefit-cost analysis amount is 0.36 for all stands with a
discount rate of r=12%.
Keywords: capital budgeting, strategy, discount rate, poplar, costs, revenues

Full text

Capital Budgeng Applied to Serbian Poplar Plantaons
  1

ISSN 1847-6481
eISSN 1849-0891
 
(1)
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
PopuluseuramericanaI-214
,
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
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

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     
    
South-east Eur for    

      
     




       
       




    




        
        

P. euramericana
 I-214)         
        
        
        
   
       


    
 




       


KEČA LJ
2 


        
         
           
         
         



    


          
        
   
         
        



      
       
        
         
      
         
       

   
        

       

         


          

        

   
  

          
 
         
      
       





      
       
       




     
PopuluseuramericanaI-214 
,
   .    

   


           
   
         
    

          
    

   

        



    
        
       

   

       

         
         

 
         
         
        
        
       
         
      


       
        
         



   



  



 


Capital Budgeng Applied to Serbian Poplar Plantaons
  3














 









  
p=12% )IRR  
p=4%  R
        
  I     
  I     
  I     
  I     
  I     
  I 29     
  III 29     
  III 29     
  III      
  I     
  I     
        

  






r = 6% r = 4% 

r
ТPТP
     
     
     +
     
     +
     +
     
     
     +
     
     
     
     

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
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


KEČA LJ
4 
        
     
 

         
      
        



   

       



         


      
        




       
   
        

    

        
        
         
   
        
        
      
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2
       
       
       
        


         
   
       
 
       
       
       
      
        
       
        
     
  

p
  

       
      R   
 
      
         
   
p
    
p


      

      


   
    
  
  


       

        
    
  
       
     
        



       

     
         
   
        
  
       
         
    
     
        
     


       


       


   
       





Capital Budgeng Applied to Serbian Poplar Plantaons
  5

 
  
         

   





        
     
      
 








      
      
  
       
      
  

    


   

     
        
      

   
      


  


          
        
           
      
    
         
         
         
       
           

       
  

   
       

        
   

       


           






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 

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n


 
2

   
  
            



KEČA LJ
6 















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





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

 


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








Capital Budgeng Applied to Serbian Poplar Plantaons
  7


 
       
        
    
         
 
    
       
          
 


           
        
   Forestry   

         
   
Project Appraisal

          
Balc For
        
      
   

          
       
      
  Int For Rev     

        
       
 South-east Eur for     

         

In eds 


         
       
     

Ined) 
   

          
      
   In     eds)
   
     

        

          
      
    Crical reviews in
environmental science and technology
   BioScience

  
       
  


        
  

    
       

 
     

       

 

         
     
    Journal of Agricultural and
Applied Economics     

 
 

 
  J Forest 

 
      Forest
Policy Econ 2    

       
     
      

       
      

 
  Can J Forest Res 

  Can
J Forest Res

        
     
 Int J Project Man     

         

    


  
        
 New Forests    



KEČA LJ
8 
       
  Renew Agr
Food Syst     

        

Bullen of the Faculty of Forestry University
of Belgrade
        
  
   Bullen of the Faculty of Forestry
University of Belgrade
        

Bullen of the Faculty of
Forestry University of Belgrade
        

    Bullen of the Faculty of
Forestry University of Belgrade
       
    
Int J Log Manag

         
      In
eds 


        
    In
 
(eds

