Standardization of Instruction. 375 



Interest, the result of use of capital, or price paid for its use for a 

 given time, or net product estimated in money. Difference between income 

 and interest. 



Nature of relation between capital and interest. 



Compound Interest justified, where applicable. 



Interest rates (valuation of capital) how influenced. 



Impersonal — personal moments ; general credit — supply and demand — 

 competition — character and safety of investment — sinking tendency ; con- 

 tract rate vs. business rate — borrower's, lender's, operator's attitude — 

 security of investment — character of business — of lender — size of invest- 

 ment — amenity of investment — belief in appreciation of values — personal 

 prejudices. 



b. In Forest Production. 



Difference between exchange value, operating for the present, and capital 

 value under management for continuity ; stumpage value vs. rent value or 

 forest capital producing wood crops (commodity vs. capital value)- As 

 long as forest property is treated as commodity current prices and in- 

 terest rates are applicable to its valuation ; future prices and interest rates 

 when forest used as crop and revenue producer, real capital. 



Nature of Forest Capital. 



Composition : soil and stock or wood capital- Difficulty of separating 

 wood capital and wood income. Stock the result of abstemiousness, un- 

 realizable for some time, hence unattractive investment. 



Form : Coppice ; high forest ; selection forest ; plantation. 



Safety: Negotiability; other drawbacks influencing investment value. 



Interest Rates on Forest Capital. 



Business rate a matter of choice as in any other business and no more 

 certain than in other business. Different rates for soil capital — wood 

 capital — administration (money) capital, combined into one for easier 

 figuring. 



Arguments for low interest rate (make capital value larger!) in forest 

 calculations : persistency, long time, size of investment ; tendency of sinking 

 rates, of rising wood prices and of increasing productiveness; safety of 

 returns and (eventually) of investment; low value of soil for other use; 

 appreciation of value due to development ; all soil culture brings lower 

 rates than manufactures. Examples to prove these arguments. 



Determine maximum and minimum rates within which to choose. In- 

 fluence of silvicultural system and rotation on rates. Proposed rates. 



Uncertainty as to factors for future reduce value of finance calculations 

 to a mere check on judgment. 



IV. Formulae of Simple and Compound Interest Calculations. 



Theory of continuity of management- Capital in terms of interest. 

 Derivation of formulae. Practice work in reading readily the meaning of 

 parts of formulae and solving problems to illustrate their application can 

 best be carried on independently while lecture course goes on. 



V. Methods of Determining Soil. Stand, Forest Values. 



These are also best explained by discussion in connection with definite 

 problems, cost values, sale values and rent values being calculated and 

 explanations given how values will be influenced, and what considerations 

 lead to choice of value. 



VI. Statistics. 



Under this head a collection of data and references should be early 

 begun by the students themselves — costs — prices — volume and quality pro- 

 duction being included. 



VII. Special Cases and Practical Hints. 



Under this head — if time permits and the problems hitherto used have 

 not illustrated sufficiently the application of method and judgment — at 

 greater length some of the more frequent and important cases of forest 

 valuation may be discussed. E. g. 



