Analysis of Optimal Rotation Period: The Application of Real Option

• Main Authors: Yu-Ming Lu, 盧又銘
• Other Authors: 林國慶
• Format: Others
• Language: zh-TW
• Published: 2007
• Online Access: http://ndltd.ncl.edu.tw/handle/76939230145502119716

碩士 === 臺灣大學 === 農業經濟學研究所 === 96 === Traditionally, the approaches of deciding the optional forest rotation period include the maximum sustainable yield, the maximum land expected value, and the maximum net present value. All these approaches are seeking to solve the optimal rotation period under an exogenously determined price of timber. However, in reality, when a landowner decides to afforest, both the prices of timber and carbon dioxide are not certain. Therefore, the above mentioned methods may not properly assess the net present value of afforestation. By assuming the uncertainty of prices of timber and carbon dioxide, based on the real option model of Chladna(2007), this study develops a theoretical model of optimal forest rotation period in Taiwan. Furthermore, under the assumption of timber price uncertainty, an empirical study is conducted to simulate and analyze the optimal rotation period of cunnignhania lancelata of landowner in Taiwan. The empirical results are summarized as follows: (1) When the prices of cunnignhania lancelata and carbon dioxide are fixed, the optimal rotation period of cunnignhania lancelata in Taiwan is 21 years. When either one of the prices of timber and carbon dioxide fluctuates randomly, the optimal rotation period will become longer than that of fix-priced one. For example, if only the price of cunnignhania lancelata fluctuates randomly, the optimal rotation period will increase to 29 years; if only the price of carbon dioxide fluctuates randomly, the optimal rotation period will increase to 24 years; if both prices fluctuate randomly, the optimal rotation period will increase to 25 years. (2) If the discount rate increases, the optimal rotation period will become shorter, whether the prices of cunnignhania lancelata and carbon fluctuate randomly or not. (3) When the price of cunnignhania lancelata fluctuates randomly and the price of carbon dioxide fixed, while the discount rate is above 3%, if the carbon release proportion becomes lower, the optimal rotation period will become shorter. (4) When both the prices of cunnignhania lancelata and carbon dioxide fluctuate randomly, the optimal rotation period will become shorter if the carbon release proportion becomes lower.