THE VALUATION OF FORESTS 95 



a crop of timber. It is the value of all future crops exclusive 

 of the one occupying the ground. 



But S v represents this value correctly, only for the year of 

 cutting, or just previous to planting. Dismissing the idea that 

 S v represents the actual "intrinsic" value of the soil itself, and 

 regarding it solely as the discounted net value of the future re- 

 ceipts from timber, it is seen that this value S v holds good only 

 for the one year. Just previous to the cut, the property is worth 

 F + 5 1 ,,. Just subsequent to cutting, the value is S v . But when 

 this net income is discounted to any previous year a, its value 







ceases to be S v and becomes The value of the entire 



i.op n ~ a 



property, soil and timber, as determined from the net revenue 

 (see 112, Formulae BI and B 2 ), is the sum of the net income 



from the standing crop plus the discounted net income from 



^ 



future sources, represented by ^ The value of the stand- 

 ing timber is IE 



i.op n a \ i.op n 



The sum is, therefore, 



Y + S , + E _ E 

 i.op n ~ a 



But since S v reappears every n years as the net value of bare 

 soil, it may be assumed that this represents the value of the soil 

 during the intervening period, and that the excess of value for 

 the property represents the value of the trees or growing stock. 

 Under this assumption, S v might be regarded as the fixed capi- 

 tal, corresponding to a sum of money, and the value of the 

 timber as the accumulating interest earned by this capital. 



To determine what annual interest this soil capital is earning, 

 it is necessary merely to multiply S v by the rate of interest p 

 used in calculating it. 



S v X o.op = soil rent ( 162). (2) 



Expectation value of soil is merely an expression of net income. 

 Instead of being permanent or fixed, it is a prediction or forecast, 

 and changes 'constantly (as do all values) not only with every 



