FUTURE VALUE OF FOREST PRODUCTS 



205 



whether simple or compound interest is meant, that is, whether 

 the original value or the increasing value is the basis of the 

 annual percentage. Stumpage as a residual value is subject to 

 more extensive proportional changes than the price of timber 

 products which causes these changes ( 188). Then, while prices 

 and stumpage value may rise at a rate equal to simple interest 

 on the value at a given date, the rate of interest, simple or com- 

 pound which this rise represents, when based on increased prices 

 or values, becomes less and less. 



Table V illustrates these relations. Should stumpage rise 

 from an original value of $5 per thousand, by the sum of $5 

 every 10 years, or 50 cents per year, the rate of increase would 

 be equivalent to 10 per cent simple interest annually on the 

 original value. 



TABLE V 

 RATE OF ANNUAL INCREASE IN VALUE OF STUMPAGE 



Values of stumpage are more apt to follow the law of increase 

 set forth in this table than to increase continuously at a fixed 

 rate of compound interest. It follows that as prices and values 

 advance, the rate of increase must fall. By first predicting the 

 amount of the increase, or' the rate expressed in terms of simple 

 interest on original value, the rate of compound interest for 

 these values may be computed if desired ( 89, Formula XIV; 

 see also 49). 



The true rate of increase in stumpage value depends upon 

 the sum of increased values due to growth in volume, improved 

 quality, closer utilization and price increment. These sources 



