STUMPAGE VALUES 



IQI 



remaining margin between the sale value of a species and these 

 total charges is its appraised stumpage value. 



181. Carrying Charges versus Profits, on Stumpage. In 

 Chapter X ( 158), it was demonstrated that a forest capable 

 of producing annual income was also capable of paying increased 

 taxes, for the reason that compound interest did not accumulate 

 on such a forest. The owner may, for his own information, 

 and to gauge the advisability of reinvesting income, compute 

 the interest on his investment for the interval elapsing between 

 cost and the income directly resulting from such cost. But the 

 total cash investment in the business does not increase by reason 

 of this interest. Neither the unearned interest, nor the actual 

 cash expenses for taxes and protection serve to increase the capi- 

 tal cost of stumpage, as long as sufficient income is secured each 

 year from some portion of the forest or business to cancel these 

 costs. 



There is the same difference between tracts of mature stumpage 

 held for speculation without cutting, and tracts on which an 

 operation is conducted, as there is between an even-aged and an 

 all-aged forest, Cases A and C ( 158). The first case is paral- 

 leled by the young forest; the second, by the forest already 

 capable of revenue. For timber, or that portion of the timber 

 holdings which cannot be cut for from 20 to 40 years, a separate 

 cost account based on economic factors ( 106) would show iden- 

 tical costs, whether or not the specific stand is a part of a large 

 holding which produces annual revenue, or is part of a specula- 

 tive holding producing no income. But there is an enormous 

 specific difference in the financial status of the owners of the 

 respective tracts, which has an important bearing on the problem 

 of carrying charges and increased stumpage values. 



The non-productive speculative holding requires an increase 

 in stumpage values sufficient to ultimately offset all annual 

 expenses, and earn compound interest on the entire investment, 

 up to the year when cutting begins, in order to show a profit 

 sufficiently large to include an enterpriser's gam ( 33). 



The productive holding, which is being operated, and is pro- 

 ducing annual income at the present time, will under certain 



