then that $19,60 is the lumber prico ("because "both we find 

 the op orator fool sure that it will bo inside of five years), 

 and we ma::e the sale to him on this "basis for $E.50 per 

 thousand. Ve read .just stumpage prices then at five year 

 internals on the rise in value of lumber above $19*50, and 

 not above Q18., as vre would if no differential was applied. 

 This is about the way that the stumpage prices were arrived 

 at in the recent Sierra Sugar Pine sale, esoept that in 

 that case a v2.50 differential was allowed, 2. of which was 

 to insure a fair operating profit to tho lumberman exactly 

 as I have stated, and 50 cents of which was an added safety 

 factor arrived at as a compromise "because tho Porester did 

 not wish to definitely agree in advance to lov/er the stump- 

 age prices in the event that lumber foil off in value in 

 the middle of any five year period. 



Discussion. 



Maddor: !7ould not the Government suf- 

 fer if the lad; of profit to a Company 

 and the consequent necessary readlust- 

 xaent downward ^of the stumpage prices was 

 caused by inexcusably high cost of oper- 

 ation? 



DuBois: Possibly it would.; but the 

 Government is running a very small chance 

 with a Company that is investing upwards 

 of two million dollars in its plant and 

 railroad. This can best be safe-guarded 

 against "by a careful determination of 

 the necessary investment in advance ~ 

 the interest charges against the manu- 

 facture of lumbar varying, of course, 

 with the size of the initial investment. 

 Maddo3i: Suppose you have eighty acres 

 in a little bioisk whore all private 

 timber is cut around it, and the Govern- 

 SB1 



