3 2 - FOREST VALUATION 



the total amount to which the sum of $100 will increase in 50 

 years, provided the investor complies with the conditions out- 

 lined in Article 49. 



The final column shows the rate which the original invest- 

 ment would have to earn annually to get the same results, pro- 

 vided the entire income were placed in a deposit vault and 

 saved until the end of the period without reinvestment. Should 

 the proprietor spend the annual income, he would have merely 

 the original capital of $100 left at 50 years. 



52. The Rate of Interest in Forest Investments. To de- 

 termine the basic rate of interest applicable to investments 

 in forestry, two factors must be analysed, namely, the relative 

 security of the investment, and the financial nature of the enter- 

 prise. It is claimed by advocates of a high rate on forest invest- 

 ments that this is justified by the ever-present risks from fire and 

 other destructive agencies, and also by the length of the period 

 elapsing between outlay and income, which makes the invest- 

 ment less desirable unless it can be shown to be more profitable. 



The first of these claims must be admitted. Risk should be 

 provided against by demanding higher interest. This subject 

 is discussed in Chapter XIII. Risks must be judged on the 

 basis of comparison with those assumed in other lines of in- 

 vestment, and due weight must be given to the present 

 development of measures of protection on the part of states 

 and associations. 



The second claim is fallacious. To demand a higher rate of 

 interest the longer the returns are deferred is a subversion of the 

 economic laws applicable to all forms of investment. The desir- 

 ability of the investment as affected by the difference between 

 annual and deferred returns will not modify the rate of interest 

 which should apply, but rather, will determine the class of 

 persons who are apt to choose such an investment. And since 

 those persons who are the most apt to favor long-term invest- 

 ments with deferred income are those possessed of foresight, 

 making provision for their children, and with sufficient capital 

 for their personal needs (44), such persons will accept a lower 

 rather than a higher rate of interest, and in many cases will not 



