the economic valuation of the proposed ... - Nature Uganda

PVB =
PVC =
Where:
36
∑ = t n
t = 1
∑ = t n
t = 1
Bt
t
( 1+
i)
Ct
t
( 1+
i)
n = number of years being considered; t = each
individual year; and i = the discount rate expressed as a
decimal fraction
» The decision-making criteria; After the
NPV
=
discounting has been completed, the present
value of the benefits (PVB) is compared to the
present value of all the costs (PVC). For a project
to be considered profitable at a given discount
rate, the present value of benefits should exceed
that of costs i.e. PVB > PVC. The net present
value (NPV). This is sometimes called “net
present worth”, and it is obtained by subtracting
the present value of costs from that of benefits
i.e. NPV = PVB - PVC or, mathematically:
∑ = t n
t = 1
Bt
− Ct
t
( 1+
i)
Where: t = individual years; n = number of years over
which the project is evaluated; B = the sum of benefits
in a given year; C = the sum of costs in a given year; and
i = the discount rate expressed as a decimal.
For a project to be acceptable, PVB > PVC i.e. the net
present value should be positive. The net present value
gives a good idea of the total profit, in present value
terms, of the project. The NPV shown above is used
to give a present value for a single ecosystem service.
However, for all the different ecosystem services that
are obtained from Mabira CFR, the Total Present Value is
caculated. The Total Present Value is the sum of the net
present values of all the ecosystem services i.e.
TPV =
Where:
m
∑ NPVs
s=
1
TPV = Total Present Value; NPV= Net Present Value; and
s (1-m) = all ecosystem services from 1 to m
Note: Simple calculus shows that TPV is equivalent to the
quotient of the NPV divided by the discount rate (i)
TPV = NPV
i
The approach is a good measure of the opportunity cost
(or forest benefits foregone) as a result of alternative
development initiatives in Mabira CFR.
2. For Mabira CFR, the volume of the standing
timber is the capital stock from which benefits
are derived, and not the stream of benefits
themselves.
3. In calculating the streams of benefits arising
from timber, poles and firewood, stumpage
values and not market prices were used.
4. The basis for calculating the value of forests for
ecotourism is the consumer surplus, representing
the price tourists are willing-to-pay, up and
above what they actually pay for the ecotourism
experience (Figure 6). Ecotourism is an important
activity in Mabira CFR.
The Economic Valuation of the Proposed Degazettement of Mabira CFR | 2011