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Quantification of Expected Return of Investment in Wood Processing Sectors in Slovakia

Authors :
Martina Kánová
Josef Drábek
Petar Ćurić
Andreja Pirc Barčić
Source :
Forests, Vol 15, Iss 1, p 75 (2023)
Publication Year :
2023
Publisher :
MDPI AG, 2023.

Abstract

The study focuses on the selected aspects of investment measurement and management for the support of financial and economic decision-making of investors in wood-processing sectors. The aim of the study was to analyze the indicators for the structure and cost of capital of furniture and paper/forest branches in Slovakia, quantify the actual expected return on investment based on the selected methodology, and consequently find out the fundamental differences resulting from the specific conditions of given sectors. Methodologically, the study uses procedures for the weighted average cost of capital (WACC), capital asset pricing model (CAPM) for determining the cost of equity, and calculation of the beta coefficient considering the risk premium. The results of the study demonstrated a similar levered beta in both analyzed sectors (1.17 in furniture, 1.20 in paper/forest), but in each sector for a different reason. The expected rate of return is higher in furniture (7.84%) compared to paper/forest products at the level of 6.04%. The findings provide the possibility of comparing the required and expected rate of return on invested capital and making the appropriate long-term investment decisions.

Details

Language :
English
ISSN :
19994907
Volume :
15
Issue :
1
Database :
Directory of Open Access Journals
Journal :
Forests
Publication Type :
Academic Journal
Accession number :
edsdoj.09364205cffb46b6afa67e99b09934ef
Document Type :
article
Full Text :
https://doi.org/10.3390/f15010075