STUMPAGE APPRAISAL FORMULAE. 



By Donald Bruce. 



While there are a number of different formulae in common 

 use at the present time in appraising stumpage, they may be 

 classified into two distinct types. The first is based on the 

 principle of allowing a certain percentage of the operating cost 

 as profit and considering the difference between the selling value 

 and this cost plus this profit as the stumpage value. The second 

 allows as profit a per annum percentage on the invested capital. 

 The most common example of the first class is what is generally 

 known as the Forester's formula, expressed mathematically as fol- 

 lows: 



X=S— O— .op (O+X) 

 or simplified 

 S 



x= o 



I. op 

 Where S=selling value ; O=operating cost, including deprecia- 

 tion, interest on fixed investment, etc. ; proper cent profit allowed ; 

 and X=rstumpage. 



It will be noted that in this particular formula, interest on 

 the fixed investment is included as an operating cost. This is 

 not, however, an essential characteristic of this type of formula. 

 The characteristic formula of the second type is as follows: 



.op C 



x=s-o- -~- 



Where C==average capital invested, and A the average annual 

 output of the operation; the other letters retaining their above 

 defined meanings. 



The main complication in this case is involved in the determina- 

 tion of the average investment and the method of charging off 

 depreciation and profit. Several quite complicated formulae have 

 been devised for this purpose, of which the most accurate but per- 

 haps the most intricate is what is known as Hunter's formula. 



