96 FOREST VALUATION 



Usually logging is cheaper in the Great Lakes country and 

 South than in East and West. But these general average figures 

 are little more than guide marks, each job has its own peculiarities 

 and it is not easy to standardize where considerations are so varia- 

 ble and where the human element is so very important. 



Logging as done in the United States is the work of a transition 

 period, many of the methods will disappear, simpler methods under 

 more uniform conditions will take their place.. When that time 

 comes the cost of logging in the United States as is now the case 

 in many of the forest districts of Europe, may be predicted within 

 very close limits. 



Where the sale of stumpage involves large amounts of timber, 

 requiring ten or more years to remove, though cutting begins at 

 once, the case of sale value grades into the expectation value, and 

 demands special consideration. On the national forests large bodies 

 of timber are sold, the timber is paid for as it is cut, the buyer does 

 not really own the stumpage, he takes no risks in case of fire or other 

 injury, except so far as the injury affects his camps, equipment and 

 the use of his outfit or investments. In this case he not only can 

 pay full stumpage value as calculated above but can pay higher 

 prices for stumpage as the prices of lumber increase. For this rea- 

 son provision is made in these contracts to review or re-arrange the 

 price scale at fixed intervals or on a particular scale. 



C. Expectation value of stumpage. 



Leaving out the question of timberland speculation there stilt 

 arise many cases where this value is involved. In buying a large 

 lumber business, mill, railway equipment and body of timber, the 

 first question is: what is the timber worth? Suppose the concern 

 has four hundred million feet or twenty years' supply of stumpage, 

 the present value of stumpage for immediate use being five dollars 

 per M. feet. Evidently it would be a mistake to pay for the four 

 hundred million at the rate of five dollars per M. feet unless the 

 buyer is very certain that the increase in value of lumber warrants 

 this. How much increase would this mean? 



If he pays $5 per M. feet, or 2 million dollars for the 400 mil- 

 lion feet, and if money is worth 5%. then this sum grows to 2 mil- 

 lion X (i-O5 20 ) or $5,300,000 in round numbers. The lumber val- 

 ues do not rise year by year but rise by groups of years usually, and 

 with this rises the value of stumpage. Assume that the stumpage 

 stays at $5 for the first 10 years and then rises to a constant figure 

 for the second JO years, how much must this be? About $13 per 

 M. feet. 



