Estimating annual investment returns from forestry and agriculture in New Zealand

This paper describes a method of estimating annual investment returns from forest growing businesses in New Zealand, using financial statement data. The method is also applied to survey data (derived from farm financial statements) published by New Zealand pastoral farming sector organisations. After data are adjusted for inflation, the total investment return is calculated as the sum of the cash return on assets, and the percentage change in asset value. The paper demonstrates that the total investment return calculated in this way is equivalent to the internal rate of return (IRR), for a single period of one year. The direct equivalence between this measure and the single-period IRR (calculated using discounted cash-flow analysis) is demonstrated algebraically and by example.