A major characteristic of Ruuhela's model is that in assessing the long- run profitability, it takes into account the growth trend of the capital expenditures thus avoiding a potential bias. In this paper we improve Ruuhela's method for estimating the IRR in two important respects. We develop the estimation method to include the more general case of capital investments with differing life-spans. For this purpose, naturally, a selection of the depreciation theory has to be made. When compared with the theoretical depreciation ratio the ratio of the depreciation on books describes the depreciation policy of the firm.
Forest industry is a central branch of industry in Finland.
The branch's share of Finland's total manufacturing was 23.1 per cent in 1980 in terms of value added. We estimate the growth, profitability, and financing behavior of eight major Finnish pulp and paper firms for the 1970's.