380 Forestry Quarterly. 



unquestionably, in the opinion of the writer, be omitted. The 

 necessary return on the capital is obviously shown by the in- 

 vestment method, and, as previously suggested, the straight op- 

 erating cost method is an admirable measure of the margin 

 necessary. The $6.00 logging job involves roughly twice the 

 chance of unforeseen costs as does a $3.00 job, and demands 

 approximately twice the margin. This is not true, however, 

 where interest on invested capital is added as a cost. The same 

 logging chance handled by a railroad instead of by driving may 

 well involve less operating cost but greater invested capital. It 

 is obviously, however, a more stable proposition and can be 

 handled on a lower margin. The decreased operating costs and 

 the correspondingly lower margin necessary should be reflected 

 by the operating cost formulae while the increased capital in- 

 vested can better be expressed and handled by the investment 

 method. 



While, in general, both formulae are necessary, in certain 

 specific cases it can be seen from inspection that one or the other 

 will give the lower stumpage rate and hence govern. Small 

 sales similar in character to that first described ordinarily in- 

 volve such a small investment that the operating cost method 

 can safely be applied without check. This is a great advantage 

 to the seller of stumpage since appraisal of these small chances 

 must usually be made by men of narrow experience who, while 

 thoroughly competent to estimate logging costs, are somewhat 

 at sea on questions of invested capital. 



To summarize, it is felt that (i) if stumpage is to be ap- 

 praised by formulae, both the operating cost and the investment 

 methods must be used and the lower stumpage indicated adopted, 

 and (2) that interest on fixed capital invested should not be in- 

 cluded as an operating cost. 



