PROFITABILITY OF EU SUBSIDY FOR THE FORESTATION PLAN IN THE CZECH REPUBLIC

European Union funds represent an important financial source and unique opportunity in many fields of the Czech economy. Applicants receive subsidy from the EU related to forestry through The State Agricultural Intervention Fund, which is an accredited paying agency and administrator. The aim of this paper is to calculate profitability of a subsidy for the forestation plan. Financial effect could be significantly higher compared to other possibilities, which foresters have. One authentic example of subsidy use for forestation of a property with its costs and incomes was calculated and compared to other possibilities, using the property in a time period of 16 years. It is the time period of the forestation plan. Net present value (NPV) of cash flows from forestation plan was compared with present value from renting the property for the same time and as well as for infinity. Internal rate of return 2% p.a. was used for calculations. Results prove that initial investment for foresting was paid back already in the first year by subsidy and the NPV of forestation plan is more than 111 thousands CZK per 1 ha (4,044 EUR) what is almost 2 times higher, compared to renting this property for market price.