Valuation of Forest: Based on An Emperical Study of Practice in Sweden

Nikolaj B. Bøge

Student thesis: Master thesis


The purpose of this master thesis is to examine how valuation of a forest should be done. The research question is: “How should a valuer valuate forest, when the basis is Swedish practice and existing theory?”. The thesis applies an inductive reasoning and is limited to Sweden, buying & selling, and commercial forest. To support the thesis primary and secondary empirical data was collected. The primary empirical data consist of ten semi-structured interviews. The secondary empirical data consist primarily of reports about forests in Sweden. The reliability, validity and sufficiency for the thesis is high. The thesis concludes that there are several factors affecting the value of a forest. The income potential for a forest is affected by the location, species and quantity, supply and demand, exchange risk, political unrest, draught, flood and frost. The costs are affected by access to the forest and labour costs. The timing of the cash flows is affected by legislation, temperature and rain. The size and fragmentation of the forest is affecting the demand and historical prices are affecting the overall market value. The market approach is preferred in Sweden, as it is based on market sales. There is a preference to combine the market approach with another approach. In the market approach 15-20 markets sales are included. The valuers adjust for historical prices and amount of wood with a regression. In the income approach the cash flow is estimated for two generations or eternity. All relevant income and costs are included. The discount rate is based on the market. Cost approach is used for strange forest. To estimate market value the market approach is the best approach. It is most important to adjust for location, historical prices, amount of tree and size of the forest. The income approach is more flexible for the factors affecting the value. All possible income and costs should be included. The climate related factors should be included based on scientific papers. The cost approach should be used for very young and strange forest. The discount rate should be based on CAPM and WACC. If forest is bought without debt CAPM should be used as discount rate. If nothing else is possible the approach the Swedish valuers uses should be used

EducationsMSc in Finance and Accounting, (Graduate Programme) Final Thesis
Publication date2020
Number of pages113