An analysis of capital investment in a scarification company

Abstract

The province of New Brunswick and it's Forest Industries are getting involved strongly in reforestation. The establishment, in the province, of a well skilled site preparation firm is then a necessity. This report deals with various ways of financing such a firm, along with the methods used to evaluate capital investment. These concepts are then applied to a real life example. We found through the example that heavy scarification, using crawler tractor, was more expensive for the forest company if they were hiring a scarification firm. This indicates that if the company intends to employ specialist to do their site preparation, they will have to spend more money to do so. Light scarification using skidder was found to be cheaper when done by a scarification firm, therefore it would be better for a firm to start with light scarification and evaluate the profitability of heavy scarification in the future. Then they can decide if they should become involved or not. The risk of starting such a business is high, but if the firm gets some support from the Forest Industry and the government of New Brunswick, a well structure scarification firm could become reality. Key Words: Capital investment in a scarification firm; C&H plow; cost analysis; scarification; site preparation; TTS-35 disc trencher.