of at least paying costs. Since this class of land is most certainly not 

 agricultural in character,, it would seem that this would be a wise point 

 of attack in beginning a policy of purchase by the state for the purposes 

 of forest production. Here at least is land which will produce nothing 

 unless the state produces timber upon it. This it can do with benefit to 

 its industries and without damage to any private interest. The extension 

 of the purchase policy could be worked out as the needs of the future 

 might suggest. 



Comparative Cost of Providing a Future Supply by Growing New Timber 

 and by Hoarding Old Timber 



This subject is introduced here because of the close relationship to 

 the problem of growing timber. Most corporations, and to a large extent 

 the federal government, proceed on the theory that the best way to insure 

 a timber supply in the future is by hoarding mature timber. It is of 

 interest, therefore, to apply the financial test to the cost of holding timber 

 as compared with growing it. This can be done in several ways, one of 

 which is by reducing to present value the stumpage price at which, in the 

 foregoing tables, it has been shown that timber can be produced. In 

 these reductions the same interest rate should be used as was used in com- 

 puting the cost of growing timber. 



Thus by reference to Table III, covering cost of growing timber 

 on Quality II soil, we find that a corporation working under 5% in- 

 terest can produce timber for $9.87 per M. ft. B. M. on a 60 year ro- 

 tation. It would then not be profitable to pay an amount for mature 

 timber (not increasing its volume, but to be held 60 years) which would 

 bring its cost to more than $9.87 at the end of that time, except as 

 the timber now mature would be of higher quality. The amount that 

 could be paid per M. would be the present worth of $9.87, less the 

 present value of the cost of protection and taxes throughout the period. 

 It is somewhat difficult to determine the latter costs, but a conservative 

 figure may be ascertained. Since the researches of Prof. F. G. Miller 

 show that timber is already taxed l^c per M. per annum on the average, 

 and the fire risk and protection must also be counted, it seems that 3c 

 per annum, throughout the period would be a very low cost for this item. 

 The solution then follows. 



Referring to interest tables* we find that the present value of $1.00 

 due 60 years hence will at 5% compound interest be $.0535. The 

 present value of $9.87 will then be $9.87x$.0535=$.53. Referring to 

 the same table, we find that the present value of $1.00 due each year for 

 60 years is $18.929. The present value of $.03 due each year for 60 

 years would be $.03xl8.929=$.57=present value of the administrative 

 costs, taxes and other expenses of holding the timber. Deducting the 

 $.57 (the cost of holding) from $.53 (the present value of $9.87, the 

 cost of producing timber) we have $.04, that is, even if the timber 

 were given to a corporation to be held 60 years it would be cheaper to 

 grow it than to take the old timber. 



To consider the holding of timber in private ownership for 60 

 years would be far fetched except perhaps in the case of the largest 



*C. S. Schenck "Forest Finance," p. 39. 



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