l8o FOREST VALUATION 



the road to a railroad company for continuous operation may 

 secure a price equal to the cost of the road, in which case no 

 depreciation is incurred. Such a result cannot be assumed, and 

 depreciation must always be charged against the transportation 

 system. 



The cost of all logging equipment, such as cables, engines, 

 horses, and other supplies, should be reckoned not in the form 

 of a capital expenditure but as depreciation. 



176. Stumpage as a Capital Investment and as a Cost of Raw 

 Materials. Methods of appraising the value of stumpage on 

 the basis of the present net residue, after subtracting logging 

 and manufacturing costs and profits, are based on the supposi- 

 tion that this timber will be removed within a short time, not 

 exceeding three to five years. Such values are applicable to 

 short-term contracts or to small bodies of timber, and to pur- 

 chases in which land is not included. But the purchase for 

 cash of large bodies of stumpage introduces an additional ele- 

 ment of cost which must be considered by the purchaser. The 

 time which must elapse previous to the actual completion of 

 cutting necessitates the holding of this stumpage, with accom- 

 panying annual expenses ( 170). This would apparently lower 

 the price the purchaser can pay, in the same manner that the 

 absence of a market at present, even if it is sure to develop 

 later, depresses present values. When transportation facilities, 

 mills and markets are ready, the price will be correspondingly 

 higher than in regions where development must follow purchase. 



It is not possible, however, to arrive at a proper appraised 

 value for large areas of standing timber by the method of com- 

 puting the value for immediate cutting, and then discounting 

 this value for the average period which the timber must 

 stand. 



In spite of the impossibility of immediate cutting, the timber 

 will usually sell for the value shown without such discount. 

 This is explained by the element of increasing prices, to which 

 may be added growth of timber and improvement in quality. 

 It would be unfair to discount a future stumpage value based 

 on present sales, when everyone, purchaser and owner alike, 



