FOREST STATICS BALANCE SHEET PROFITS 113 



over, regardless of ownership. This investment must include 

 the annual expenses which are not cancelled by annual income. 

 In this case, 



Net earnings = Y + S v , 



Capital invested by owner = S c + C + n (e) (see 105). 



Then net earnings = Y + S v - \(S C + C + E) i.ox n -El, 



Y + S v + E 

 n (N2) 





But in this formula, E = ' , and as x appears on both sides 

 o.ox 



of the equation, a solution is not reached. The value of x may 

 be obtained by trial. A trial per cent x' is first substituted for 



x in the expression -- and the value E' determined. The 

 o.ox 



solution then gives a value x". This new value is then sub- 



stituted for x' and -- - gives E". The second solution of the 

 o.ox 



equation will give a value for x usually within one-tenth of one 

 per cent of true value. 



This result is satisfactory, for the rate, x, is a prediction or 

 estimate in most instances; or where results are at hand, it is 

 merely a calculation intended to gauge the relative merits of 

 the investment compared with others. For such purposes, even 

 \ per cent is sufficiently close. 



In the solution of the value of x, the use of logarithms is not 

 usually necessary. The value may be found in Table VI, op- 

 posite n years, and interpolated to one-tenth of one per cent. 



This method of gauging the profits of forest production is far 

 more suitable to new conditions characteristic of the industry 

 in America than the method of capitalizing income in the form 

 of soil value or computing the "forest per cent." In almost 

 every instance, except for lands owned by the nation, the cost of 

 acquiring the property is known, or is a determining factor to 

 be decided previous to undertaking forestry. It is upon this 



