THE FINANCIAL ASPECT OF FORESTRY. 1 9 



will reveal the fact that it has been assumed that money can 

 be borrowed for 80 years without any interest at all being paid 

 upon it, which is utterly absurd.^ 



Now, in order to arrive at the correct annual value, it will 

 be necessary to determine the credit sum which will have 

 accumulated at the end of the rotation, if all sums of money 

 received or spent are deemed to have been invested or borrowed 

 at compound interest. From this sum the original cost of 

 planting — viz., ^8 — should be deducted, as the crop will be 

 debtor to this amount of capital. The remaining sum will 

 represent the accumulated net profits, the annual value of which 

 is found by discounting the amount at compound interest into a 

 yearly payment throughout the whole rotation. In the above 

 instance, if 4 per cent, compound interest is assumed, there 

 would be a net yearly return of 3s. 2d ^ on the invested capital 

 of ;^i8 per acre. If the calculations are made at 3^ per cent, 

 compound interest the return will be 4s. 5d., and if at 3 per cent, 

 compound interest 6s. id. 



Another method sometimes adopted in presenting financial 

 statements concerning forestry, is to state the rate of compound 

 interest which will be yielded at the end of the rotation on 

 the initial expenditure. 



In the case under consideration, if monies received and spent 

 during the rotation were credited and debited with 4 per cent, 

 compound interest to the end of the rotation, a return equal to 

 approximately 2^ per cent, compound interest would be realised 

 on the invested capital. If 3 per cent, compound interest were 

 calculated on monies received or spent, the return on the 

 invested capital would be equal to approximately ih per cent, 

 compound interest. 



Again, if the land could be bought for ^5 an acre, the 

 return would be just under 2f per cent, compound interest in the 

 former case, and just over 2| per cent, compound interest in the 

 latter case. 



Now although this method of showing the financial aspect 



^ [We think that there are few persons, likely to be consulted as experts on 

 a question of this sort, who are unaware that compound interest has to be 

 employed in the calculation the various formulae for which are given in Vol. 

 III., Part II., of Schlich's Mmittal of Forestry. — Ho\. Ed.] 



-This yearly return is not influenced in any way by the original cost price 

 of the land. I(, however, the cost of planting, fencing, and cleaning the young 

 crop were only £a, (instead of ;^8 as instanced), the yearly return would be 

 3s. 4d. instead of 3s. 2d. 



