TABLES FOR DETERMINING PROFITS IN FORESTRY 

 By W. D. Sterrett and W. B. Barrows 



In considering the advisability of forestry for any particular 

 area or species, the important thing is to determine what interest 

 rate on the capital invested can be realized from such an enter- 

 prise. Probably the most practical method is to consider the 

 capital as including only the initial investment in the land and 

 cost of forming the forest crop.^ In this case the annually recur- 

 ring expenses for taxes and administration, after allowing a lib- 

 eral compound interest rate (6 per cent.) on them, are deducted 

 from the gross profit when the crop reaches maturity and is sold. 

 The net profit is considered as the gross profit (total stumpage 

 value of the crop at end of rotation) less the cost of formation 

 and less the annually recurring expenses for the whole rotation 

 compounded at 6 per cent. The land is considered of the same 

 value at the end as at the beginning of the rotation and, there- 

 fore, its cost is not deducted. The advisability of forestry can be 

 readily determined by figuring what compound interest rate this 

 net profit represents, for the entire rotation, on the initially 

 invested capital. The following formula is used for this cal- 

 culation^ : 



p=100l \—Y — ^^ 1 ). where p = compound interest 



rate, n=:number of years of rotation, S=stumpage value per 

 acre at n years, L= cost of land, F=cost of formation, and A= 

 cost of administration and taxes in n years at 6 per cent, com- 

 pound interest. The net profit will equal S - F —A. In the 

 tables the column headed "Expenses" gives the values of A. 



It will be seen from the above that, in order to predict the 

 profit in and advisability of forestry in any particular case, it 

 is necessary to predict what the yield and its stumpage value 

 will be in a certain number of years, and also the annully recur- 



'"Forest Management of Loblolly Pine," Bulletin 11 of the Department 

 of Agriculture, by W. D. Sterrett, and article by W. B. Barrows, Pro- 

 ceedings of American Foresters. Vol. VIII, No. 3. 



'This method is conservative in that it does not allow for possible returns 

 from thinnings, which in Europe often equal 25 and up to 40 per cent, 

 of the final returns. 



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