STUMPAGE VALUES l8l 



expects stumpage to increase in value ( 188). Were it definitely 

 known that no such increase would occur, the expectation value 

 of the revenue from cutting the timber would be less than the 

 present sale value for immediate cutting. As it is, the expec- 

 tation value of the stumpage is based on this probable increase 

 and its present sale value is not depressed by the postponement 

 of cutting. Again, the great advantages accompanying the 

 ownership of large bodies of timber and the reduction of depre- 

 ciation costs ( 173) and transportation charges ( 174) in them- 

 selves more than offset such possible discount in value. 



The value of stumpage for immediate purchase as a capital 

 investment may therefore be appraised on the basis of what 

 it is worth on the completion of the necessary transportation 

 and milling facilities, or, if these are assured, it may safely be 

 based on present value. 



For stumpage which is paid for in small instalments just 

 previous to or following the cutting of the timber, the value is 

 manifestly that existing at the time of payment. On long-term 

 contracts, as a result of such postponed payments, a readjust- 

 ment of stumpage values is required at reasonable intervals, 

 on account of the expected increase in future prices of lumber. 

 This method of payment, by which the operator is relieved not 

 only of the investment with its attendant annual expense, but 

 also of the risk, and of any losses which may result from fire 

 or any other agency, puts stumpage in the same class as that 

 of raw materials, rather than capital. The attendant advan- 

 tages to the purchaser, corresponding to the prospective loss 

 and risk of holding' timber, are recognized as having a value 

 great enough to form a material inducement in sales of timber 

 on National Forests. It is usually sufficient to offset the addi- 

 tional cost of brush burning and other silvicultural measures 

 required by the government. 



177. The Determination of Legitimate Profits. Overturn 

 Methods. Costs must be gauged in relation to the quantity of 

 product resulting from a given expenditure, and a cost account 

 seeks to determine the cost and the resulting profit on each 

 unit (25). All factors of cost, including depreciation, may be 



