32 FOREST VALUATION 



c. INCOME VALUE OF LAND OR SOIL IN FORESTRY. 



Expectation value of soil or Se. 



When a man buys land to raise timber and does this as a matter 

 of business and not merely sentiment, for sport or summer home, 

 etc., the case is one of investment and he values the land in propor- 

 tion as it produces an income or crop. In business the income, here 

 net income, which can be made from the land by raising a particu- 

 lar crop, timber, is the only reliable measure of value. 



To the man who is in the business of raising the crop, whether 

 farm crop or timber, this net income per acre is not only the correct 

 measure of the value of the land but it is also a measure of the work 

 or operation of raising the crop. A good farmer or forester who 

 selects the right kinds of crop, best suited to the soil and climate, 

 cares for the land, sows, tends and harvests well, gets a larger net 

 income than a less competent man. Any mistake or neglect reduces 

 the income and with this the income value of the soil or land. 



In this way the income value of the land becomes a measure of 

 the value of land and the effectiveness of its management. 



i. General method of calculation for Se. 



In the case of farm property where the income from each acre 

 is a yearly one, the income value of a given acre of land is the net 

 income capitalized. If an acre of land on a ten-year average can 

 produce $10 net income and money is rated at 3% the income value 



io 



of this acre of land is or $33 3^30 



0.03 



Where an acre of land is planted to pine and the pine requires 

 eighty years to grow to acceptable size, the income from this acre 

 comes not yearly but every eighty years. It is a periodic income or 

 rental which is assumed as in the case of a farm to come forever. 



The present value of these net incomes, coming every eighty 

 years is the value of the acre of land. If the timber is worth $400 

 and it has cost $175 to raise it ; the net income is $225 and the pres- 

 ent value of all these net incomes, coming every eighty years, 



Se = (i.op r i) = (i.o3" i) = ( 10.64 i) =:$23 ' 4a 



which means that this particular acre of land is worth $23.40 when 

 used to raise pine where this is allowed to grow to the age of eighty 



