CHOICE OF RATE OF INTEREST. 117 



(d) As a rule successful forest management requires 

 larger estates than the cultivation of field 

 crops. 



Bearing these matters in mind, attempts may be made to 

 determine the rate of interest for the forest industry in one 

 of the following ways : 



(1) Determination based upon the rental and value of the 

 soil. 



It has been shown above that 



By substituting the value S of the soil for C, and the 

 rental R of the soil for. I, the above equation becomes 



The drawback of this method lies in the difficulty of ascer- 

 taining correctly the value of the soil and of the rental without 

 having previously determined the rate of interest; in other 

 words such a determination would turn in a circle. 



(2) Determination based upon the rental and value of the 

 forest. 



If the value of a forest (F), which is managed so as to 

 yield an annual net return Ef, is known from a sale which has 

 taken place, the per cent, would be : 



The conditions for the applicability of the method are : 



(a) That the annual rental of the forest is accurately known. 



(b) That the forest is, at any rate approximately, in such a 



condition that it can yield a steady annual return. 



(c) That the price realized for the forest was the result of 



genuine competition. 



There is great difficulty in complying with all these con- 

 ditions, so that, on the whole, neither this nor the first 

 methods are of much practical value. 



