FOREST STATICS BALANCE SHEET PROFITS 105 



ance the cost or credit side with the asset or debit side of the 

 balance sheet. This rate would in most instances include a 

 fraction or decimal, such as 4.27 per cent. The rate which 

 thus balances cost and income is the rate of interest earned by 

 the investment. And since money is never borrowed at odd 

 rates, and the earning power of an investment does not deter- 

 mine the rate of interest used in calculating its value (62), 

 these items of cost and value seldom balance exactly, but always 

 show a profit or loss. 



Yet the fact that this rate exists indicates a second method 

 of determining enterprisers' profits. The rate earned, expressed 

 in terms of compound interest, eliminates the element of time 

 as effectually as does discount, and enables the investor to com- 

 pare the income rather than the expectation value of two in- 

 vestments. The forest investment must earn p per cent before 

 it becomes as desirable as the money it represents. If x per 

 cent is earned, then when * per cent > p per cent the excess 

 represents the ratio of profit or enterpriser's gain, per dollar 

 of investment, in excess of the standard rate. If x per cent 

 < p per cent, the rate x per cent still indicates net income, 

 but compared with p per cent, there is a loss, or rather a failure 

 to realize the amount desired. 



122. Profits in Destructive Lumbering. It is assumed that 

 owners who do not intend to continue in forest production will 

 sell the land or devote it to some other purpose. Its sale or 

 appraised value for this purpose is credited as income. 



Let P = profit. 



P = Y + S 8 - (C + S c ) i. op* - E (i.op - i) 



= 7 + S, + E - (C + S c + E) i.op. (H) 



This formula is expanded, by the addition of other items of 

 both cost and income, to the form, 



P = Y + S S + E + T P (i.o/>-) + T q (i.c#-) 

 + T r (i.op n ~ r ) -(C + S C + E) i. op" 

 - C d (i.op n ~ d ) - C e (i.o^-') - C t (i.o^-O- (HO 



This formula gives the profit on a single stand of timber, 

 for the year of sale, assuming that both timber and land are 



