various rates of interest and a table showing the present vahie of $1.00 

 per annum at compound interest. Table 6 (a to h) * gives the expected 

 future costs and returns for each site and rotation period. 



A land expectation value is not necessarily related to actual prices. 

 It reflects the value that may be assigned to land for a given invest- 

 ment and management program. Interest rates are usually assumed. 



The land expectation value is then calculated in the following 

 manner: All expected future returns are discounted and all expected 

 future costs (annuities) are also discounted to give present values. 

 The discounted cost value subtracted from the discounted return value 

 yields the land expectation value at specific rates of interest, i.e., as 

 shown in Table 7 (a to h).* 



Financial Return 



Graphs 3 and 4 show land expectation values at varying rates of 

 interest and rotation ages for site indexes 60 and 65 for the stands 

 studied. They show the investor the value he could assign to the land 

 which would yield the specified rate of retiirn. This value can be used 

 as a guide for the purchase of land for white pine plantation establish- 

 ment under the given level of management. The maximum rate of re- 

 turn for each rotation occurs at a zero land value. 



If land is already owned and will continue to be owned, then 

 rates of interest more clearly reflect investment opportunities repre- 

 sented by the choices of plantation establishment and management 

 levels for a particular tract of land. 



A comparison of the two stands when land cost is zero, Table 9, 

 shows that the stand on site index 65 yielded a higher rate of return 

 than the stand on site index 60 for similar rotation ages. The stand 

 on site index 60 had its highest rate of return, 5.4 percent, at a rota- 



Table 9. Maximum Rate of Return on Plantations Studied, 

 Cost of Land = Zero 



Rotation 

 Age 



45 

 55 

 65 

 70 



Maximum rate of 

 return percent 



Rotation 



Age 



4.2 

 5.2 

 5.4 

 5.0 



45 

 55 

 65 



75 



Maximum rate of 

 return percent 



6.7 

 5.8 

 5.7 

 5.4 



tion age of 65 years. The rate of return decreased for both shorter 

 and longer rotations. However, since the rates of return for rotations 

 of 55, 65 and 60 years are very close, it would be advisable to say that 

 the maximum rate of return could easily fall in any of the three 

 rotations. 



See Appendix for Tables 6 and 7. 



