RATE OF COMPOUND INTEREST 239 



per cent, tables ; or /s. 46. per annum on the 3^ per cent, 

 tables ; so that the investment is not nearly so good as it 

 would appear at first sight. Now, although the advice 

 tendered is quite correct, it is, as already explained, very mis- 

 leading, and its adoption should never be countenanced by 

 any one. 



Statement of the Rate of Compound Interest. Another 

 method, perfectly correct in principle, and advocated by 

 many, is to state the rate of compound interest which any 

 proposed investment in afforestation may be expected to 

 yield, by the end of the rotation. 



Now, in order to find this rate of compound interest, 

 it is necessary to add together the net value received for 

 the final crop and the various sums of money received from 

 time to time by the sale of thinnings, such sums being 

 reckoned as accumulating at compound interest to the 

 end of the rotation. From this gross credit sum must be 

 deducted the accumulated value, at compound interest to 

 the end of the rotation, of all the annual outgoings. Then, 

 add the value of the original cost of the land, 1 and the 

 resulting sum will represent the increased value of the 

 original outlay. Then, from tables, 2 find the rate of com- 

 pound interest at which the original outlay will amount at 

 the end of the rotation to the present net credit sum. 

 The rate of compound interest at which the value of the 

 thinnings and the annual outgoings is reckoned will make 

 a difference to the ultimate result. If a high rate be taken 

 a better result will generally be shown than if a low rate 

 be taken, unless, indeed, the thinnings be very slight, 

 and their accumulated value is less than that of the annual 

 outgoings. 



The above may be thus illustrated by reference to the 

 data given for a crop of Larch (Soil and Situation, Quality 

 II.) in Chapter XL, when, if the land cost 12 per acre; 



1 It is presumed that the value of the land remains the same at the 

 end of the rotation. The original cost of planting is left out, as it is 

 capital lost for ever. 



2 Vide Appendix. 



