124 FOREST VALUATION 



It is important to understand the significance of this treat- 

 ment of soil value in valuing timber. One way of describing 

 this "expense" is that the owner of the timber is charged with 

 the interest on the soil value, or "soil rent," as a cost of bringing 

 the timber crop to maturity, dating from the present year. 

 This is the assumption made by Schlich.* This would class 

 soil rent as an actual future cash expense similar to taxes. But 

 soil rent cannot be an actual future cost or outlay, unless a differ- 

 ent person owns the soil and rents it to the one who grows the 

 trees. The capital value of the property, timber and soil, takes 



no account of this cost (Formula D 2 ), for v ^- is the dis- 



i.op n 



counted net income, which constitutes soil value. 



A separation of the present net value of the standing timber 

 from the value of subsequent crops (soil S v ) gives 



E = value of timber, 



i.op n ~ a 



= present value of soil if released in n a years. 

 i.op n " 



Comparing this with 



F + ^jf E _ ^ + ^ = yalue of timber> 

 i.op n 



S v = value of soil, 



the sum of values for soil and timber, or the value of the property, 

 is identical, but the proportion of this total value assigned to 

 the timber is greater by the first method than by the second, 

 by just the amount of the discounted interest on S v . 



In the second method, instead of assuming that the timber 

 owner is charged with interest on S v , a much clearer conception 

 is that the land owner, who in fact is the same person, benefits 

 by the release of his land value from its necessary use for n a 

 years to produce the revenue Y. He therefore cannot, de- 



Y 4- E 

 mand the full value - ' E for the crop, but accepts a 



value smaller by the exact amount of the excess in value of 



* Schlich's " Manual of Forestry," 4th Ed., Vol. Ill, Part II, Chapter III, p. 133. 



