80 FOREST VALUATION 



condition, with respect to the timber crop, and may include cer- 

 tain permanent improvements, the cost to the purchaser may not 

 coincide with the cost of production, for the sale is usually the 

 means of realizing profit on the part of the original owner ( 90). 

 This initial cost is usually a lump sum, which includes the value 

 not only of all separate stands of timber, but does not often 

 separate the value of the land from that of the timber crop. An 

 analysis of this cost must precede any attempt to institute a 

 cost-keeping system separately for different parcels or stands. 



Separation of the cost of land and timber, while usually 

 postponed in such instances until actual separation occurs 

 through cutting, is necessary if the true cost of holding the timber 

 is to be computed, and the land permanently devoted to for- 

 estry. But if the purchase is a timber speculation, and the 

 land, after the timber is stripped from it, is to be sold or aban- 

 doned, there will be no need of this distinction. 



In the former case, 



C+S C = cost of timber and land, or purchase price of property. 



The purchase price of the property is substituted for cost of 

 land plus silvicultural operations, in Formula A. The net cost 

 of production for timber depends now upon the value agreed 

 upon for the land at time of purchase, for this must be subtracted 

 as representing a capital investment. The formula is in all re- 

 spects identical with A, and interest accumulates for the period 

 elapsing between date of purchase and date of final sale or in- 

 come, which is assumed as n in the problem. 



When interest is thus computed as a cost on the investment 

 in stumpage, as well as on taxes and other expenses, a rate of 

 6 per cent will cause this "cost" to double in twelve years. 

 The stumpage value must double in a shorter period or there 

 will be no income to replace current expenses. This raises the 

 important question as to the length of time which it is possible 

 for private owners to hold stumpage without cutting it ( 181). 

 For periods of forty years or over, it might easily be shown that 

 the costs of raising a new crop of timber leave a higher margin 

 of profit than those incurred in carrying a mature crop with a 

 high initial value, for the same length of time. 



