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

Abstract

The article analyses the problems of the determination of the fair value of a multifunctional family farm using the method of discounted cash fl ow, presents a model of determination of the fair value of a multifunctional family farm and tests it for a selected family farm. The specifi city of the cash fl ows in a multifunctional family farm is related to the cash fl ows from fi nancial 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: marketbased and social discount rate (SDR). It is appropriate to use the SDR to discount the cash fl ow of investment, the economic and social benefi ts 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 fl ow and discount rates and measuring value drivers; forecasting cash fl ow and discount rate value drivers; value drivers' composition; determination of the terminal value; and cash fl ow discounting.

The identification of geographical factors on the determination of the value of agri-food companies

“…In this regard, we estimate a linear regression based on the historical sales of each firm in the sample and infer future sales according with the linear model fitted (Alekneviciene et al, 2013). Once future sales were determine, we projected the other components of FCF by applying the average of the annual past values of the ratio that each FCF component weights with respect to historical sales (Alekneviciene et al, 2012).…”

“…Our hypothesis is that the proximity to these strategic points favours the interaction with external firms and third actors and gives them benefits, which are reflected in a higher value. In particular, we base our study on the discounted cash flow (DCF) model, usually applied in agri-food literature (Alekneviciene et al, 2013;Vidal and Ribal, 2017). This model has a dynamic character discounting the future cash flows (FCF) that the firm will create in the future to present values.…”

Geographical proximity on the valuations of unlisted agrarian companies: Does distance from company to company and to strategic points matter?

“…Therefore, in order to estimate future FCF for the next five years (2015-2019) we had to assume the evolution of the main components of FCF. In this regard, we fitted a linear regression based on data on each company's historical sales and extrapolated future sales based on the linear model fitted (Alekneviciene et al, 2013). Once future sales were estimated, we projected the rest of the components of FCF by applying the mean of the annual past values of the proportion (ratio) that each FCF component represents with respect to historical sales (Alekneviciene et al, 2012).…”

“…Vidal et al (2004) also used the analogical-stock market procedure to obtain a global valuation for Spanish wine cooperatives applying financial and management variables. Other studies, such as Ribal et al (2010), Alekneviciene et al (2012Alekneviciene et al ( , 2013 overcome the limitations derived to apply the discounted cash flow (DCF) model in agrarian non-listed firms examining the specific characteristics of this sector. Declerk (2016) analysed firms' financial performance for the period 2002-2009 applying multiplier methodology for food companies.…”