Costs and Values in a Logging Operation. 687 



i/5V=$8.9i 



I— R (Table 2 (a) )=$i7.i5— $3=$i4.i5 



X = (I — R) — 1/5V = $5.24 (Stumpage value per acre) 



__ = $0,370 



The same plan of apportioning costs and operator's profit may 

 be applied to the method for arriving at stumpage values worked 

 out by Wm. B. Hunter of the Bureau of Corporations. This 

 method is based on the principle of allowing as the operator's 

 profit a fixed percentage of the capital at risk in the operation and 

 charging this against the returns each year. Since this capital is 

 diminished annually by the amount allowed for depreciation, the 

 amount of profit also diminishes, but the total amount available 

 each year for profit and depreciation is the same. Therefore 

 the amount available for depreciation increases, as the sum of 

 the annual depreciation and annual operator's profit is a con- 

 stant. This constant, K, which is charged against each year's 

 returns, is obtained by the following formula: 



B 



K = pA+^ 



in which : 



A = original cost of plant plus working capital 

 B = A — wrecking value of the plant 

 P = rate of profit 

 (i-j-p) n— I 



d = 



P 

 n = number of years of operation 



The stumpage value is then found by subtracting from the 

 selling price the other operating costs including maintenance, plus 

 the constant allowed for depreciation and profit. This constant 

 can either be reduced to the basis of thousand board feet, disre- 

 garding the value of the different species, or the distribution 

 between depreciation and profit and the stumpage can be made 

 in proportion to the difference in value between the f. o. b. 

 price of the species and the operating costs. This latter plan can 

 be effected by several methods, but the one illustrated in table 4, 



