214 TIMBER VALUATION 



will determine in the main. It is conceivable that under 

 untoward climatic conditions cordwood may require for its growth 

 as long as high class sawtimber, but the places that can produce 

 cordwood in a reasonable period are going to set the price. 

 Accordingly the following figures will be used: 



Vears 



Cordwood requires 25 



Boxboards require 50 



Dimension lumber requires 75 



Lumber for " cutting up " requires 100 



Wide, clear lumber requires 150 



To illustrate how these figures were derived take white pine as an 

 illustration of a softwood and red oak for the hardwoods. For 

 the periods given above their diameters breast-high are as 

 follows: 



Red oak 



25 years 



50 years 



75 years 



100 years 



150 year's 



Next to the question of time required the problem of determin- 

 ing the proper interest rate is the most vital. It is also the most 

 complex and difficult to reach common ground on. Where most 

 of the misunderstanding comes is in the varying conceptions of 

 what constitutes " net income." The ordinary business man 

 takes this as meaning what is left for him after he has paid his 

 debts and frequently he forgets such untangible liabilities as 

 interest on his investment, depreciation, overhead expenses, etc. 

 Consequently he assumes, and rightly, that he must make from 

 10 to 20 per cent per annum on his investment. But the busi- 

 ness of growing wood differs radically from the ordinary business 

 of small capital and quick turnover. The main item of expense 

 is the interest on the capital tied up in the land, the expense of 

 planting or regenerating naturally, and the annual cost of ad- 

 ministration and protection. While none of these is large in 

 itself the interest on them for a period of 50 to 100 years 



