Farmland valuation: a net present value approach using simulation

dc.contributor.authorWestergard, Chris
dc.date.accessioned2015-04-23T21:25:29Z
dc.date.available2015-04-23T21:25:29Z
dc.date.graduationmonthMay
dc.date.issued2015-04-23
dc.description.abstractAs the single largest asset class on the agriculture sector’s balance sheet, real estate is clearly a significant component of America’s farming community’s well-being and key to production agriculture. Purchasing farmland requires a significant commitment of capital, and one of the chief considerations for producers when contemplating purchasing a property is the return they can expect to receive from their investment over the course of its productive life. The traditional Net Present Value approach to investment valuation is difficult to implement since estimating cash flows over the life of the property is extremely difficult due to uncertainty in yields and commodity prices. By using historical price, yield, and cost data, this thesis develops a net present value spreadsheet model that uses simulation to determine an expected cash flow per acre. This expected cash flow can then be used to determine the gross cash flow from a particular farm over the term of the investment. While not explicitly accounting for non-direct expenses in the model such as returns to management, the techniques discussed provide a solid foundation for a more thorough enterprise analysis and give the producer an estimate of cash flows independent of short-term management decisions.
dc.description.advisorAllen M. Featherstone
dc.description.degreeMaster of Agribusiness
dc.description.departmentAgricultural Economics
dc.description.levelMasters
dc.identifier.urihttp://hdl.handle.net/2097/19035
dc.language.isoen_US
dc.publisherKansas State University
dc.rights© the author. This Item is protected by copyright and/or related rights. You are free to use this Item in any way that is permitted by the copyright and related rights legislation that applies to your use. For other uses you need to obtain permission from the rights-holder(s).
dc.rights.urihttp://rightsstatements.org/vocab/InC/1.0/
dc.subjectLand purchase
dc.subjectNet Present Value
dc.subjectSimulation
dc.subjectMontana Agriculture
dc.subject.umiAgriculture, General (0473)
dc.subject.umiEconomics, Agricultural (0503)
dc.subject.umiEconomics, Finance (0508)
dc.titleFarmland valuation: a net present value approach using simulation
dc.typeThesis

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