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Determination of the fair value of a multifunctional family farm: a case study

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  • Aleknevičienė, Vilija
  • Stončiuvienė, Neringa
  • Zinkevičienė, Danutė

Abstract

The article analyses problems of the determination of the fair value of a multifunctional family farm using the method of discounted cash flow, presents a model of determination of the fair value of a multifunctional family farm and tests it for a selected family farm. The specificity of the cash flows in a multifunctional family farm is related to the cash flows from financial support, different value drivers of the earnings before interests and tax and their calculation methodology, and the value of created public goods and externalities. Two types of discount rates are used to determine the value of a family farm: market-based and social discount rate (SDR). It is appropriate to use the SDR to discount the cash flow of investment, the economic and social benefits whereof are distributed among present and future generations. The stages of the determination of the fair value of a farmer’s farm include: value drivers’ decomposition; differentiation of cash flow and discount rates and measuring value drivers; forecasting cash flow and discount rate value drivers; value drivers’ composition; determination of the terminal value; cash flow discounting.

Suggested Citation

  • Aleknevičienė, Vilija & Stončiuvienė, Neringa & Zinkevičienė, Danutė, 2013. "Determination of the fair value of a multifunctional family farm: a case study," Studies in Agricultural Economics, Research Institute for Agricultural Economics, vol. 115(3), pages 1-10, December.
    • Handle: RePEc:ags:stagec:161080
    DOI: 10.22004/ag.econ.161080
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