Planin. Software for economic analyzis of planted forests. Edilson Batista de Oliveira.

1 Planin Software for economic analyzis of planted forests Edilson Batista de Oliveira edilson.oliveira@.embrapa.br 2 2015

2 Index 1. Introduction...3 2. Inside the Planin software...4 3. Economic evaluation criteria...10 3.1. Net Present Value (NPV) of Cach Flow...10 3.2. Annualized Net Present Value (ANPV)...11 3.3. Internal Rate of Return (IRR)...11 3.4. Benefít-Cost Ratio (B/C)...12 3.5. Land Expectation Value (LEV)...12 4. Sensitivity Analisis...13 5. Using Planin to compare management regimes...13 5.1. Management Regimes with the same age of rotation...15 5.1.1. Decision making using the IRR and NPV method...15 5.1.2. Decision making using the IRR and ANPV method...16 5.1.3. Decision making using the B/C...17 5.2. Management regimes with different ages of rotation...18 5.3. Application of the Sensitivity análisis...19 6. Final Considerations...25 7. Tables...27

3 1. Introduction The PLANIN software allows for the calculation of parameters frequently used in economic analyses, evaluating wood production for different forest plantation management regimes. The software also enables the analysis of profit sensitivity for different rates of attractiveness and allows the user to track costs and produce annual expenditure reports. The software considers the diverse aspects of operational costs in forest planting, maintenance, and harvesting. Users can undertake economic analyses of large scale wood production through various evaluation criteria, supporting decision making on ideal management regimes in relation to production costs, interest, market price of wood and the raw material requirements of vertically integrated industries. The integration of PLANIN with the Sis software suite (SisPinus, SisEucalipto, SisAraucária, SisAcácia, SisTeca, and SisBracatinga) provides a complete assessment of biological and economic factors, enabling the configuration of different scenarios based on production variation and wood prices for different outcomes, as well as variation in rates of attractiveness and production costs. The PLANIN software is described here using examples, as well as a short study of the economic-financial evaluation criteria that support decision making in relation to thinning period and intensity and age of final harvest for forest plantations.

4 2. Inside the PLANIN software The PLANIN software is designed to address all aspects of operational costs associated with forest planting, maintenance, and harvest. It provides integrated operational resources for data entry and file creation. The startup screen (Figure 1) enables the user to access all data entry screens. In the green column on the left of the screen, menu items are provided which help the user to organize and use information. By selecting an item in the column, the corresponding screen appears. FIGURE 1. Startup screen in the PLANIN software.

5 The item Final Age refers to the age of final harvest of the population. The Rate of Attractiveness is the annual percentage that the value invested in the plantation could produce if invested in some other activity (for example, in a savings account). It is the interest rate that represents the minimum percentage that the producer intends to gain per year through the forest plantation. For Sensitivity Analysis, the user must provide minimum and maximum values, while Increment defines the variation interval from the Initial Interest Rate for the presentation of the results. The white Items column provides access to the data entry screens for Production and Price (Figure 2) and Costs (Figure 3). Two data Catalogues can be accessed to assist in data entry: Products (Figure 4) and Costs (Figure 5). To process the information, click on Results (Figure 6a and 6b) or Cost Report (Figure 7a and 7b) located at the bottom of the screen.

6 FIGURE 2. Data entry screen for wood production and price information. FIGURE 3. Data entry screen for production and wood prices.

7 FIGURE 4. Product Catalogue screen. FIGURE 5. Cost Catalogue screen.

8 FIGURE 6a. Results output. FIGURE 6b. Results output.

9 FIGURE 7a. Cost Report. FIGURE 7b. Cost Report.

10 3. Economic evaluation criteria 3.1 Net Present Value (NPV) of Cash Flow The Net Present Value (NPV) is the current value of an investment developed from cash flow, which is defined by a series of revenues and costs. The NPV is obtained from the algebraic sum of the value of each revenue or cost of the cash flow in reference to an alternative j, evaluated with an interest rate of i, over n periods. The mathematical expression of NPV is given by: NPV t n 0 F n i n 1 (1) where NPV J = Net Present Value of cash flow of alternative j; t = age of rotation; n = number of periods of capitalization involved in each element of the series of Revenue or Cost of the Cash Flow, n=0, 1, t; F n = Each of the different values involved in the Cash Flow of alternative j, that occur in distinct periods n of the planning horizon; i = comparative Interest Rate or Minimum Rate of Attractiveness;

11 3.2. Annualized Net Present Value (ANPV) For this criteria, the Net Present Value of cash flow at a Minimum Rate of Attractiveness (i) is transformed into an equivalent uniform annual series through its multiplication, as: t i( 1 i) t ( 1 i) 1 (2) At the end of each period (year), there is a uniform amount which is the sum of the discounted values from the NPV of Cash Flow. 3.3. Internal Rate of Return The Internal Rate of Return (IRR) is the interest rate that nulls the Net Present Value of an enterprise. At this rate, the sum of the discounted Revenue is equal to the sum of discountable Costs. Therefore, the Internal Rate of Return is given the value i*, in which: t n Fn ( 1 i*) 0 (3) n 0 An investment is considered financially acceptable if the difference between the IRR (i*) and the Minimum Rate of Attractiveness of the market (i) are greater than or equal to zero (i* - i r 0). Generally, the IRR is determined through iterative processes.

12 3.4. Cost/Benefit Ratio The Cost/Benefit Ratio of a project indicates how many units of received capital with benefits (B) are obtained for each unit of capital invested (C). B C t n 0 t n 0 R C n n 1 i 1 i n n (4) Its purpose is to enable the verification of project viability. Values of B/C greater than 1 indicate that a project is profitable (or economically viable). Values less than 1 indicate that a project is not viable. If the B/C is equal to 1, it means that the revenue are equal to the costs. To compare projects, we must assume the repeatability of Cash Flow cycles, calculating the Least Common Multiple, or using a Net Uniform Value. 3.5. Land Expectation Value The Land Expectation Value (LEV), also known as Faustmann s Formula, soil expectation value, or bare land value, is a special calculation of the Net Present Value over an infinite series of rotations. The mathematical expression of LEV is given as: t t R C 1 i n n t n n 0 LEV (5) 1 i 1 The LEV enables the comparison of management regime alternatives with different lengths and rotations. It provides the Present Value of total cash flow produced with a series of infinite rotations, considering a rotation age of t years.

13 4. Sensitivity Analysis The Sensitivity Analysis enables the study of the effects that variations in the parameters that make up the cash flow have on the cash flow. This analysis shows different results for a range of possible values, allowing the verification of what would happen if values were modified within this range. The user should indicate the variation intervals of the parameters considered uncertain, and extract the diverse numerical or graphic representations that they wish to monitor. The Sensitivity Analysis allows the user to visualize the risks resulting from alterations in the management regime, interest rates, costs, and different prices. 5. Using PLANIN to compare management regimes The basis of forest management planning is the definition of management regimes, principally the age at final harvest, or rotation of the population, that provides maximum profitability. The PLANIN software and its application in comparing the economics of management regimes were first presented by Oliveira (1995) in which 25 forest management regimes for Pinus taeda L. were studied. This analysis is presented herein and, although outdated, the original values of costs and prices in dollars have been maintained. The study highlights the advantages and disadvantages of each economicfinancial criteria of analysis and includes profit sensitivity analyses of the management regime that is considered the most profitable, based on variation in cost centres of production and wood prices. OLIVEIRA, E.B. Um sistema computadorizado de prognose de crescimento e produção de Pinus taeda L. com critérios quantitativos para a avaliação técnica e econômica de regimes de manejo. Curitiba: Universidade Federal do Paraná, 1995. 134p. Doctoral Thesis.

14 The amount of wood produced for each management regime (R1 to R25) was generated by SisPinus (Table 1) and the respective production for each end use are presented in Table 2. The costs of production and the wood prices used in the study are presented in Tables 3 and 4, respectively. Each alternative was analyzed by PLANIN, using a rate of attractiveness of 10% per year, considering the costs and prices outlined in Tables 5 to 9. For special laminate and laminate, the study considers logs with a specific small end diameter of 35 cm and 25 cm, respectively, and a length of 1.35 m. For sawlogs and pulp, the small end diameters were 15 cm and 8 cm, and length of 2.4 m and 1.2 m, respectively. The classification of Special Laminate, Laminate, and Sawlog, can likely be substituted in today s market for the more common terminology of Sawlog I, Sawlog II, and Sawlog III, and the log length of the first two would be approximately 2.5 m. Considering the desired outcomes of the user, the economic evaluation of an isolated management regime can be based on any parameter from the results table produced by PLANIN. If we consider rates of attractiveness, we must adopt criteria that take into account the following rates: Net Present Value, Annualized Net Present Value, Internal Rate of Return, Land Expectation Value, and Cost Benefit Ratio. To compare two or more regimes, with these rates of attractiveness, we must initially note if the populations have the same age of rotation. Depending on the situation, we can apply economic evaluation criteria in isolation or as a comparison.

15 Some situations to consider in decision making are discussed in the following section. 5.3. Management regimes with the same age of rotation 5.3.1. Decision making using the IRR and NPV method When examining management regimes, we can calculate the IRR alone and compare it to the Minimum Rate of Attractiveness. This enables the user to understand if the regimes are economically viable or not. However, the comparison of IRR does not inform decision making in relation to the best alternative. This decision must be based on the NPV of each alternative calculated at the same rate of attractiveness (i). The selection of the best alternative will depend on the value of the rate of attractiveness. For example, if we compare management regime R4 with R20, we can see that for a rate of attractiveness at 10%, R4 presents a greater NPV. However, the IRR for R4 is lower, indicating that, based on a determined interest rate, the R20 regime becomes more advantageous. Figure 9 shows the NPV of regimes R4 and R20 generated by the Sensitivity Analysis option in PLANIN, based on the data in Table 10. In the figure, we can see that for rates of attractiveness from zero to the intersection of the curves, the R4 regime provides greater NPV, and as such presents the most viable option. At the rate of attractiveness where the curves intersect, the alternatives present the same profitability and both present Rates of Return greater than the Minimum Rate of Attractiveness (10%).

16 FIGURE 9. Trend of Net Present Value (NPV) for management regimes R4 and R20 as a function of different Rates of Attractiveness. From the intersecting point of the two curves to the point at which they cross the x-axis, the R20 regime is the most viable in relation to greater NPV and non-negative profitability. For rates of attractiveness that result in segments of the NPV curve below the axis, both regimes are considered unviable as they present negative profitability. 5.3.2. Decision making using the Internal Rate of Return and the ANPV The method of selecting regimes based on ANPV and IRR is similar to that discussed above. As a first step, we can verify the economic viability of each alternative and, subsequently, select the regime that offers a greater ANPV as it presents the regime with the higher profitability. In Figure 10, the ANPV of regimes R4 and R20 are presented at different rates of attractiveness (the values used can be found in Table 10). The interpretation of these results follows the same principles as the method discussed above using the NPV.

17 FIGURE 10. Trend of Annualized Net Present Value (ANPV) for management regimes R4 and R20 as a function of different Rates of Attractiveness. Assuming the repetition of cycles, the ANPV resulting from the cash flow of the original cycle period would be consistent with the ANPV of cash flow with a period equal to the Least Common Multiple. As such, these values can be used to compare projects and do not depend on the projects having the same duration. Of the 25 tested regimes, R15 was the most profitable with an ANPV of US$102.7 followed by R9 and R10 (ANPV = US$ 101.7) and R16 (ANPV = US$ 98.6). 5.3.3. Decision making using the Cost/Benefit Ratio Tables 5 to 9 demonstrate that the management regimes that present the greatest Cost/Benefit Ratio (C/B) were R9, R10, R15, and R16, all with a C/B of 1.46 (Tables 7 and 8). This value indicates that in each of these regimes, the producer received US$ 1.46 as benefit (B) for every dollar invested (C). The overlap of these values does not mean that the regimes

18 are equal in terms of profitability. If we compare R10 and R15, populations with the same age of rotation, we can see that while the first presents a NPV of US$ 892.1, the second is more profitable with an NPV of US$ 900.80. 5.4. Management regimes with different ages of rotation The interpretation of the comparison criteria for profitability of management regimes with different durations is the same as for regimes with equal durations; however, it only makes sense if we compare alternatives with the same planning horizon. As such, we must allow for the repeatability of cycles and adopt the Least Common Multiple of the original durations as a common term. This procedure is valid for all criteria of analysis studied. However, some criteria become unnecessary because the results are the same, thus making the repetition of cash flow for the management regimes redundant. In Table 12, the results of the analysis criteria for the comparison between regimes R20 and R25 are presented, with 20 and 30 year rotation, respectively, and with repeated cycles of equal cash flow, both with a planning horizon of 60 years. In conducting this analysis without repeating the cycles, the NPV of the regime with a rotation of 20 years was 15% greater than the regime with a 30 year rotation, but reached 27.4% when considering a common planning horizon of 60 years. This percentage can be detected when we apply the ANPV and LEV methods, using the original durations of the management regimes. Accordingly, these methods do not require the calculation of the least common multiple, nor the use of lengthy calculations. Similarly, other methods that do not require cycle repetition for calculation purposes, are the Cost/Benefit Ratio and IRR. To compare management systems with different durations, the repetition of each alternative system should be kept under their original conditions over the entire planning horizon, which is equivalent to the least common multiple of the rotation age of each regime.

19 5.5. Application of the Sensitivity Analysis The Sensitivity Analysis shows the effects of systematic changes to costs, different prices, interest rates, and age of rotation on the economic profitability of a project. For the sensitivity analysis, we adopt as the basis regime R14 with a rate of attractiveness of 10%, and costs and prices as specified in Table 3. The following parameters were analyzed: 1. Rates of Attractiveness 2. Age of Rotation 3. Costs of Planting and Maintenance 4. Costs of Harvesting 5. Price of Wood For each variable we established a range of variation from 50% to 150%, at intervals of 10%, in relation to an age of 20 years, rate of attractiveness of 10%, and costs and prices specified in Table 3. To study wood production in relation to age of rotation, we used the intervals from regimes R7 and R13 to R19 (Tables 1 and 2). The analyses were processed using PLANIN and the results are presented in Table 12. For the age of rotation variable (Table 12B), the calculation of NPV was done without considering the repetition of cycles. With this exception, the analysis of sensitivity can be completed using any of the representative values (ANPV, B/C, LEV, or IRR).

20 The graph in Figure 11 shows the sensitivity of ANPV for all studied variables. Through this, we can see the parameters that have the greatest influence on ANPV are the rates of attractiveness and wood prices. The economic variables to which the ANPV show less sensitivity were the costs of planting and maintenance and costs of harvesting. The lines representing these costs are almost overlapping. However, for interest rates higher than 10%, the costs of planting and maintenance tend to have a greater influence than those related to harvesting, despite the inclusion of harvesting costs in the cash flow. FIGURE 11. Sensitivity analysis of Annualized Net Present Value in relation to the studied variables.

21 This observation can be evaluated through the sensitivity analysis of ANPV in relation to rates of attractiveness in two situations: firstly, the costs of planting and maintenance are considered zero; secondly, the costs of harvesting are considered zero. The results are presented in Table 13, and demonstrated graphically in Figure 12. FIGURE 12. Analysis of ANPV sensitivity of management regime R14 without considering costs of harvesting and costs of planting and maintenance, in relation to variations in rates of attractiveness

22 The variation in age of rotation presents a quadratic function, indicating an optimal age of 22 years. This variable, in comparison with wood prices and rates of attractiveness, makes the ANPV less susceptible to percentage alterations. However, economically these variations are heightened significantly; with the established conditions the final harvest at 22 years, compared with 18 years, represents an increase in profitability of 28.4%. In Figure 13, we show the ANPV curves as a function of the age of rotation for different rates of attractiveness. As the rate of attractiveness increases, the maximum profitability is achieved with shorter cycles. In a range of 2 to 4 years around the most lucrative rotation age, the alterations in ANPV are minimal. This enables a certain amount of flexibility in decision making related to rotation of the population; however, with longer periods than these, major losses can occur.

23 Age (years) 18 20 22 24 26 28 30 ANPV (RA=6%) 187.7 220.3 246.6 254.3 256.1 251.7 245.7 ANPV (RA=8%) 131.0 153.3 169.1 169.5 165.3 156.3 146.3 ANPV (RA=10%) 79.9 94.4 102.7 98.6 91.0 80.3 69.1 ANPV (RA=12%) 34.0 42.6 45.7 39.0 30.1 19.2 8.6 FIGURE 13. Annualized Net Present Value (ANPV) as a function of age of rotation and different rates of attractiveness (RA%). The age of rotation is significantly sensitive to variations in cash flow. An increase of 30% in the log price for special laminate (Diam. >35.0 cm) increases in 2 years the optimal age of rotation for rates of attractiveness of 6% and 8%. For rates of attractiveness of 10%, the age of rotation continues the same, but with an increase of 24% in profitability. For rates higher than 10%, this proportion is even greater (Figure 14).

24 Age (years) 18 20 22 24 26 28 30 ANPV (RA=6%) 200.8 246.6 287.3 301.6 307.1 308.0 302.8 ANPV (RA=8%) 141.8 174.4 200.9 204.5 205.5 196.5 186.4 ANPV (RA=10%) 88.8 111.3 127.4 125.7 119.1 108.7 96.8 ANPV (RA=12%) 41.2 56.0 67.7 59.4 50.5 39.3 27.4 FIGURE 14. Annualized Net Present Value (ANPV) as a function of age of rotation and rates of attractiveness, considering an increase of 30% in the price of wood for special laminate (Diameter > 35.0 cm).

25 The sensitivity analysis for age of rotation has significant practical importance because the decision making cannot always be based on maximizing profitability of a specific population. The age of rotation constitutes one factor that is contingent on decision making related to technical, economic, or strategic criteria. It is often impossible to base decisions solely on economic criteria. Factors such as maintaining the availability of raw material, in the case of vertically integrated forest operations, the need to sustain production, problems with roads and other difficulties during harvest can lead administrators to implement a final harvest outside of the optimal age. As such, the assessment of profit fluctuation as a function of age enables a strategic vision, while looking to minimize possible losses. 6. Final Considerations The PLANIN software enables the user to undertake economic analyses of forest production on a large scale through various evaluation criteria. It also helps to inform decision making in relation to ideal management regimes as a function of production costs, interest rates, wood prices, and the need to provide raw material to integrated industries. In using the Net Present Value (NPV) and Cost/Benefit Ratio (C/B) in comparing different management regimes, we must consider equal

26 planning horizons. The analysis through these criteria are more informative if they are observed simultaneously. The Land Expectation Value (LEV) and the Annualized Net Present Value (ANPV) are more effective in economically evaluating forest production when looking to compare management regimes with different rotation ages; the second presents the advantage of greater simplicity in interpreting the results. The sensitivity analysis is a practical tool for evaluating the implications of costs and profitability of wood production in relation to variations in rates of attractiveness and the various cost centers and prices.

7. Tables 27

28 Table 1. Management regimes of Pinus taeda used in the study. 2500 trees planted per hectare. Dominant height (15 years) = 22 metros. T1: 1 st thinning (systematic 1 every 3 lines + selective up to 1200 trees/ha). T2: 2 nd thinning (selective 40% of population). T3: 3 rd thinning (selective 30% of population) FH Final harvest with respective age of population.

29 Table 2. Wood production of Pinus taeda using different management regimes by type of end use. Manag. Regimes Total Volume (m 3 /ha) Special Laminated Volume (m 3 /ha) Laminated Sawlog Pulp Energy R1.FH R2.T1 R2.FH R3.FH R4.FH R5.FH R6.FH R7.T2 R7.FH R8.FH R9.FH R10.FH R11.FH R12.FH R13.T3 R13.FH R14.FH R15.FH R16.FH R17.FH R18.FH R19.FH R20.T1 R20.T2 R20.T3 R20.FH R21.FH R22.FH R23.FH R24.FH R25.FH 710,2 86,9 513,2 610,2 700,0 782,3 851,6 71,3 398,3 484,2 567,0 647,1 723,4 791,0 75,1 387,3 462,7 537,9 609,1 675,9 740,9 799,9 137,3 90,4 85,8 434,1 506,9 576,6 641,2 700,2 756,0 0,0 0,0 7,7 26,8 53,1 82,6 112,2 0,0 12,4 30,8 67,4 118,0 158,1 201,8 0,0 28,2 67,4 123,1 167,9 214,6 266,9 317,3 0,0 0,0 0,5 44,2 89,1 130,4 171,1 217,9 266,0 126,0 0,0 136,4 199,6 253,5 295,3 349,2 0,9 132,2 195,5 243,1 271,7 315,8 345,9 8,1 173,5 214,6 239,9 264,3 293,0 296,4 316,6 1,1 3,4 11,3 206,2 230,6 261,1 289,0 304,5 317,2 376,2 19,5 263,5 278,3 288,6 309,5 295,3 23,1 193,9 204,6 198,8 203,9 196,1 188,9 47,4 149,1 143,6 135,1 137,6 128,4 140,2 130,7 50,1 37,9 33,6 142,9 145,5 145,6 144,0 139,8 134,6 179,4 49,3 92,0 91,3 92,1 83,0 82,5 41,1 52,0 45,2 49,1 45,2 45,3 47,9 17,5 30,9 31,3 34,2 33,9 34,6 32,3 29,9 69,5 42,9 18,2 35,3 35,3 33,7 31,5 32,7 32,7 28,6 18,1 13,7 14,3 12,6 12,0 12,4 6,1 7,8 8,0 8,6 8,3 8,0 7,3 2,2 5,6 5,7 5,6 5,4 5,3 5,5 5,4 16,6 6,2 2,2 5,5 6,0 5,8 5,5 5,3 5,5 T1, T2, and T3: 1 st, 2 nd and 3 rd thinning, respectively. FH: Final Harvest.

30 Table 3. Costs of wood production for Pinus taeda used in the study. Item US$ Planting/ha 700.00 Harvest 1. Tree cutting/m 3 0.98 2. Delimbing/m 3 0.18 3. Extraction/m 3 1.00 4. Cutting/m 3 0.16 5. Carrying/m 3 0.71 6. Transportation/m 3 2.30 7. Unloading/m 3 0.67 Administration/ha.year 20.00 Maintanence/ha Year 1 150.00 Year 4 50.00 Year 9 40.00 Obs.: The fixed costs of maintenance are included in the administration costs. Table 4. Wood prices used in the study for Pinus taeda by end use. End use US$ Special Laminate... 47.75 Laminate... 27.91 Sawlog... 17.81 Pulp... 8.94 Fuel... 7.72

31 Table 5. Revenue and Cost Flow and criteria for Investment Analysis for Management Regime R1. Rate of Attractiveness = 10.0%. Age Revenue (US$) Costs (US$) 0 0.00 720.00 1 0.00 170.00 2 0.00 20.00 3 0.00 20.00 4 0.00 70.00 5 0.00 20.00 6 0.00 20.00 7 0.00 20.00 8 0.00 20.00 9 0.00 60.00 10 0.00 20.00 11 0.00 20.00 12 0.00 20.00 13 0.00 20.00 14 0.00 20.00 15 0.00 20.00 16 12041.41 4281.20 Economic-financial analysis parameters US$ Total Revenue 12041.4 Total Net Revenue 6 500.2 Total Average Revenue 752.6 Total Costs 5541.2 Total Average costs 346.3 Average Net Revenue 406.3 Present Revenue Value 2620.6 Present Cost Value 1991.3 Net Present Value 629.2 Annualizaed Net Present Value 80.4 Cost-Benefit Ratio 1.32 Land Expectation Value 804.34 Internal Rate of Return 13.5

32 Table 6. Revenue and Cost Flow and criteria for Investment Analysis for Management Regime R2 to R6. Rate of Attractiveness = 10.0%. Age Revenue (US$) Costs (US$) 0 1 0.00 0.00 720.00 170.00 2 0.00 20.00 3 0.00 20.00 4 0.00 20.00 5 0.00 70.00 6 0.00 20.00 7 0.00 20.00 8 927.77 541.40 9 0.00 60.00 10 0.00 20.00 11 0.00 20.00 12 0.00 20.00 13 0.00 20.00 14 0.00 20.00 15 0.00 20.00 16 9,795.78 3,099.80 18 12,733.68 3,681.80 20 15,671.32 4,219.40 22 24 18,532.83 21,196.29 4,714.40 5,129.60 Criteria for analysis of investment (US$) Management Regime R2 R3 R4 R5 R6 Age of Rotation 16 18 20 22 24 Total Revenue 10,721.2 13,661.4 16,599.1 19,460.6 22,124.1 Total Net Revenue 5,841.8 8,150.2 10,518.3 12,844.8 15,053.1 Total Average Revenue 670.1 759.0 829.9 884.6 921.8 Total Costs 4,879.4 5,503.2 6,080.8 6,615.8 7,071.0 Total Average Costs 305.0 305.7 304.0 300.7 294.6 Average Net Revenue 365.1 453.2 525.9 583.8 627.8 Present Revenue Value 2,564.1 1,973.9 1,942.2 1,902.8 1,849.2 Present Cost Value Net Present Value 1,977.0 587.1 1,973.9 749.7 1,945.2 817.1 1,902.8 806.7 1,849.2 735.6 Annualized Net Present Value 75.0 91.4 96.0 92.0 81.9 Benefit-Cost Ratio 1.30 1.38 1.42 1.42 1.40 Land Expectation Value 750.4 914.1 959.7 919.6 818.7 Internal Rate of Return 13.5 13.8 13.6 13.3 12.8

33 Table 7. Revenue and Cost Flow and criteria for Investment Analysis for Management Regime R7 to R12. Rate of Attractiveness = 10.0%. Age Revenue (US$) Costs (US$) 0 1 0,00 0,00 720,00 170,00 2 0,00 20,00 3 0,00 20,00 4 0,00 20,00 5 0,00 70,00 6 0,00 20,00 7 0,00 0,00 8 927,77 541,40 9 0,00 60,00 10 0,00 20,00 11 0,00 20,00 12 851,06 447,20 13 0,00 20,00 14 15 0,00 0,00 20,00 20,00 Final havest 16 8.260,26 2.409,80 18 11.036,88 2.924,60 20 14.029,25 3.422,60 22 17.317,27 3.902,60 24 20.322,54 4.359,80 26 23.138,91 4.770,80 Criteria for analysis of investment (US$) Management regime Age of rotation R7 16 R8 18 R9 20 R10 22 R11 24 R12 26 Total Revenue 10.039,1 12.815,7 15.828,1 19.096,1 22.101,3 2.491,7 Total Net Revenue 5.420,7 7.642,5 10.177,5 12.864,9 15.373,0 17.738,3 Total Average Revenue 627,4 712,0 791,4 868,0 920,9 958,4 Total Costs 4.618,4 5.173,2 6.236,2 6.728,4 6.728,4 7.179,4 Total Average Cost 288,6 287,4 283,2 283,2 280,3 276,1 Average Net Revenue 338,8 424,6 505,9 584,7 640,5 682,2 Present Revenue Value 2.501,7 2.689,1 2.831,3 2.831,3 2.767,2 2.645,5 Present Cost Value 1.963,4 1.973,3 1.939,2 1.939,2 1.907,1 1.868,7 Net Present Value 538,3 715,7 829,5 892,1 860,1 766,8 Anualized Net Present Value 68,8 87,3 101,7 101,7 95,7 84,7 Benefit-Cost Ratio 1,27 1,36 1,46 1,46 1,45 1,42 Land Expectation Value 688,0 872,8 1.017,1 1.017,1 957,3 847,9 Internal Rate of Return 13,4 13,8 13,7 13,7 13,3 12,8

34 Table 8. Revenue and Cost Flow and criteria for Investment Analysis for Management Regime R13 to R19. Rate of Attractiveness = 10.0%. Age Revenue (US$) Costs (US$) 0 1 0,00 0,00 720,00 170,00 2 0,00 20,00 3 0,00 20,00 4 0,00 20,00 5 0,00 70,00 6 0,00 20,00 7 0,00 20,00 8 927,77 541,40 9 0,00 60,00 10 0,00 20,00 11 0,00 20,00 12 851,06 447,20 13 0,00 20,00 14 0,00 20,00 15 0,00 20,00 16 1.243,70 471,20 17 0,00 20,00 Final harvest 18 9.163,88 2.343,80 20 12.089,18 2.795,60 22 15.328,75 3.247,40 24 18.189,25 3.674,60 26 21.061,82 4.075,40 28 23.826,08 4.465,40 30 26.624,14 4.819,40 Criteria for analysis of investment (US$) Management regime R13 R14 R15 R16 R17 R18 R19 Age of rotation 18 20 22 24 26 28 30 Total Revenue 12.186,4 15.111,7 18.351,3 21.211,8 24.084,3 26.848,6 29.646,7 Total Net Revenue 7.142,8 9.576,3 12.324,1 14.717,4 17.149,1 19.483,4 21.887,5 Total Average Revenue 677,0 755,6 834,1 883,8 884,6 958,9 988,2 Total Costs 5.043,6 5.535,4 6.027,2 6.494,4 6.615,8 7.365,2 7.759,2 Total Average Cost 280,2 276,8 274,0 270,6 300,7 263,0 258,6 Average Net Revenue 396,8 478,8 560,2 613,2 583,8 695,8 729,6 Present Revenue Value 2.622,9 2.771,6 2.857,7 2.821,3 1.902,8 2.626,8 2.500,4 Present Cost Value 1.967,0 1.967,9 1.956,9 1.935,8 1.902,8 1.879,4 1.848,6 Net Present Value 655,8 803,8 900,8 885,6 806,7 747,4 651,8 Anualized Net Pres. Value 80,0 94,4 102,7 98,6 92,0 80,3 69,1 Benefit-Cost Ratio 1,33 1,41 1,46 1,46 1,42 1,40 1,35 Land Expectation Value da 794,7 944,1 1.026,9 985,6 919,6 803,1 691,4 Terra Internal Rate of Return 13,6 13,8 13,8 13,5 13,3 12,7 12,3

35 Table 9. Revenue and Cost Flow and criteria for Investment Analysis for Management Regime R20 to R25. Rate of Attractiveness = 10.0%. Criteria for analysis of investment (US$) Age Revenue (US$) Costs (US$) 0 1 0,00 0,00 720,00 170,00 2 0,00 20,00 3 0,00 20,00 4 0,00 70,00 5 0,00 20,00 6 0,00 20,00 7 0,00 20,00 8 0,00 20,00 9 0,00 60,00 10 1.672,46 843,80 11 0,00 20,00 12 0,00 20,00 13 0,00 20,00 14 1.201,28 562,40 15 0,00 20,00 16 0,00 20,00 17 0,00 20,00 18 1.117,37 414,80 19 0,00 20,00 Final harvest 20 10.768,69 2.624,60 22 13.643,79 3.079,00 24 16.453,09 3.059,00 26 19.124,73 3.866,60 28 21.726,41 4.221,20 30 24.286,58 4.556,00 Criteria for analysis of investment (US$) Management regime Age of rotation R20 20 R21 22 R22 24 R23 26 R24 28 R25 30 Total Revenue 14.759,8 17.634,9 20.444,0 23.115,8 25.717,5 28.277,7 Total Net Revenue 9.034,2 11.434,9 13.783,6 16.028,2 18.235,3 20.420,7 Total Average Revenue 738,0 801,6 851,8 889,1 918,4 942,6 Total Costs 5.725,6 6.200,0 6.660,6 7.087,6 7.482,2 7.857,0 Total Average Cost 286,3 281,8 277,5 272,6 267,2 261,9 Average Net Revenue 451,7 519,8 574,3 616,5 651,3 680,7 Present Revenue Value 2.762,8 2.838,2 2.832,5 2.766,8 2.668,7 2.553,9 Present Cost Value 1.996,4 1.987,7 1.969,9 1.944,9 1.916,4 1.887,4 Net Present Value 766,4 850,5 862,7 821,9 752,3 666,5 Anualized Net Pres. Value 90,1 97,0 96,1 89,7 80,8 70,7 Benefit-Cost Ratio 1,38 1,43 1,44 1,42 1,39 1,35 Land Expectation Value 900,3 969,6 960,1 897,2 808,4 707,0 Internal Rate of Return 13,7 13,7 13,5 13,2 12,8 12,4

36 Table 10. Sensitivity analysis of Net Present Value and Annualized Net Present Value for management regimes R4 and R20, at different Rates of Attractiveness. Rate of Attractiveness VLP (US$) VPLA (US$) VPLA (US$) VPLA % R4 R4 R20 R20 R4 0,0 10.518,4 525,9 9.034,2 451,7 1,0 8.463,0 469,0 7.322,3 405,8 2,0 6.793,4 415,5 5.921,9 362,2 3,0 5.434,2 365,3 4.773,5 320,8 4,0 4.325,7 318,3 3.829,6 281,9 5,0 3.419,7 274,4 3.052,0 244,9 6,0 2.677,8 233,5 2.409,9 210,1 7,0 2.069,1 195,3 1.878,5 177,3 8,0 1.568,8 159,8 1.437,8 146,4 9,0 1.156,9 126,7 1.071,5 117,4 10,0 817,0 96,0 766,4 90,0 11,0 536,3 67,3 511,8 64,3 12,0 303,9 40,7 298,8 40,0 13,0 111,2 15,8 120,4 17,1 14,0-48,8-7,4-29,4-4,4 15,0-181,8-29,0-155,5-24,8 Table 11. Criteria of economic evaluation (US$) for management regimes R20 and R25. Rate of Attractiveness = 10.0%. Regime de manejo Idade de rotação (anos) R20 20 R25 30 R20 (3 ciclos) 20 R25 (2 ciclos) 30 Total Revenue 14.759,8 28.277,7 44.280,0 56.555,4 Total Net Revenue 9.034,2 20.420,7 27.102,6 40.841,4 Total Average Revenue 738,0 942,6 738,0 942,6 Total Costs 5.725,6 7.857,0 17.176,8 15.714,0 Total Average Cost 286,3 261,9 286,3 261,9 Average Net Revenue 451,7 680,7 451,7 680,7 Present Revenue Value 2.762,8 2.553,9 3.234,7 2.700,3 Present Cost Value 1.996,4 1.887,4 2.337,2 1.995,6 Net Present Value 766,4 666,5 897,5 704,7 Anualized Net Pres. Value 90,1 70,7 90,1 70,7 Benefit-Cost Ratio 1,38 1,35 1,38 1,35 Land Expectation Value Internal Rate of Return 900,3 13,7 707,0 12,4 900,3 13,7 707,0 12,4

37 Table 12. Economic evaluation criteria for management regime R14, as a function of variations in: Rates of Attractiveness (A); Age of Rotation (B); Planting and Maintenance Costs (C); Harvest Costs (D); and Wood Prices (E). Table 12A. Rates of Attractiveness (Percentage) Percentage of variation 50 60 70 80 90 100 110 120 130 140 150 Attract. (%) 5 6 7 8 9 10 11 12 13 14 15 ANPV NPV B/C LEV IRR 257.2 220.3 185.8 153.2 122.9 94.4 67.7 42.6 19.0-3.1-23.9 3205.3 2227.4 1968.0 1505.4 1122.0 803.8 538.9 318.2 133.8-20.4-149.8 2.06 1.92 1.79 1.66 1.53 1.41 1.29 1.18 1.08 0.99 0.90 5144.0 3672.5 2653.8 1916.6 1365.7 944.1 615.2 355.0 146.3-22.0-151.5 13.8 13.8 13.8 13.8 13.8 13.8 13.8 13.8 13.8 13.8 13.8 Table 12B. Age of Rotation (years) Percentage of variation Final Harvest (age) 70 80 90 100 110 120 130 140 150 14 16 18 20 22 24 26 28 30 ANPV 41.7 68.5 80.0 94.4 102.7 98.6 91.0 80.3 69.1 NPV 307.3 538.3 655.8 803.8 900.8 885.7 833.3 747.4 651.8 B/C 1.16 1.27 1.33 1.41 1.46 1.46 1.44 1.40 1.35 LEV 417.2 688.0 800.0 944.1 1026.9 985.6 909.7 803.1 691.4 IRR 12.4 13.2 13.6 13.8 13.8 13.5 13.1 12.7 12.3 Table 12C. Harvesting Cost (US$/m 3 ) Percentage of variation 50 60 70 80 90 100 110 120 130 140 150 Harvesting 3,0 3,6 4,2 4,8 5,4 6,0 6,6 7,2 7,8 8,4 9,0 ANPV 146,7 136,2 125,8 115,3 104,9 94,4 83,9 73,5 63,0 52,6 42,1 NPV 1.248,8 1.159,8 1.070,9 981,7 892,8 803,8 714,9 625,7 536,7 447,7 358,7 B/C 1,82 1,72 1,63 1,55 1,48 1,41 1,35 1,29 1,24 1,19 1,15 LEV 1.466,9 1.362,3 1.257,7 1.153,2 1.048,6 944,1 839,5 735,0 631,7 525,9 421,3 IRR 15,6 15,2 14,9 14,5 14,2 13,8 13,4 13,0 12,6 12,2 11,8 Table 12D. Planting and Maintenance Costs (US$/ha) Percentage 50 60 70 80 90 100 110 120 130 140 150 Of variation Planting 650 420 490 560 630 700 770 840 910 980 1050 75 90 105 120 135 150 165 180 195 210 225 Maintanence 25 30 35 40 45 50 55 60 65 70 75 20 24 28 32 36 40 44 48 52 56 60 ANPV 146,5 136,1 125,7 115,3 104,8 94,4 84,0 73,6 63,1 52,7 42,3 NPV 1.247,5 11,58 1.070,9 981,2 892,5 803,8 715,0 626,3 537,5 448,8 360,0 B/C 1,82 1,72 1,63 1,55 1,47 1,41 1,35 1,29 1,24 1,19 1,15 LEV 1.465,3 1.361,1 1.256,8 1.152,6 1.048,3 944,1 839,3 735,6 631,4 527,1 422,9 IRR 18,0 16,9 16,0 15,2 14,4 13,8 13,2 12,7 12,2 11,8 11,4

38 Table 12E. Wood prices (US$/m 3 ) Percentage 50 60 70 80 90 100 110 120 130 140 150 of variation Special Lam. 27,87 28,65 33,42 38,20 42,97 47,75 52,52 57,30 62,07 66,85 71,66 Laminated 13,95 16,75 19,54 22,33 25,12 27,91 30,70 33,49 36,28 39,07 41,86 Sawlog 890 10,69 12,47 14,25 16,03 17,81 19,59 21,37 23,15 24,93 26,71 Pulp 4,47 5,36 6,26 7,15 8,05 8,94 9,83 10,73 11,62 12,52 13,41 Energy 3,86 4,63 5,40 6,18 6,95 7,72 8,49 9,26 10,06 10,04 11,58 ANPV -68,4-35,8-3,2 29,3 60,8 94,4 126,9 159,5 192,0 224,6 257,1 NPV -582,5-304,8-27,5 249,5 517,8 803,8 1.080,6 1.358,0 1.634,9 1.912,3 2.189,1 B/C 0,70 0,85 0,99 1,13 1,26 1,41 1,55 1,69 1,83 1,97 2,11 LEV -682,2-358,0-32,3 293,1 608,2 944,1 1.269,2 1.595,0 1.920,3 2.246,1 2.517,3 IRR 5,4 7,9 9,8 11,3 12,6 13,8 14,8 15,8 16,6 17,4 18,1 Table 13. Annualized Net Present Value of management regime R14, not considering Planting and Maintenance Costs or Harvesting Cost, as a function of variations in Rates of Attractiveness. Rate of Attract. (%) 5 6 7 8 9 10 11 12 13 14 15 Planting & Maint. 405.1 costs = 0 Harvesting 330.2 cost = 0 358.3 314.4 273.4 234.9 199.0 165.3 133.8 104.3 76.8 50.8 299.2 270.7 244.5 220.6 198.6 178.6 160.4 143.8 128.8 115.1