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Financial Maturity: A Theoretical Review

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Several financial maturity models are analysed to identify the key relationships, particular assumptions, and means of handling the time element. The correct model to employ depends upon a firm's ability to vary factors of production and on the accessibility of factor markets. A generalization of the Faustmann or soil-rent approach avoids implicit assumptions regarding land and capital market access. In addition to supporting adherents of the soil-rent model, the general solution illustrates the relationships between various theoretical approaches. The logical inconsistencies between the present net worth and the internal rate of return models is resolved by this comparison. Marginal conditions are defined for each approach, but no attempt is made to utilize them as operational decision-making aids. A tabular comparison of the models is included.

Document Type: Journal Article

Affiliations: Assistant Professor of Forestry, University of California at Berkeley

Publication date: March 1, 1965

More about this publication?
  • Forest Science is a peer-reviewed journal publishing fundamental and applied research that explores all aspects of natural and social sciences as they apply to the function and management of the forested ecosystems of the world. Topics include silviculture, forest management, biometrics, economics, entomology & pathology, fire & fuels management, forest ecology, genetics & tree improvement, geospatial technologies, harvesting & utilization, landscape ecology, operations research, forest policy, physiology, recreation, social sciences, soils & hydrology, and wildlife management.
    Forest Science is published bimonthly in February, April, June, August, October, and December.

    2015 Impact Factor: 1.702
    Ranking: 16 of 66 in forestry

    Also published by SAF:
    Journal of Forestry
    Other SAF Publications
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