CHOICE OF RATE OF INTEREST. 115 



(c.) Temporary high prices can be fully utilised by 



cutting more than the normal yield for a time, 



or vice versa. 



(d.) As a rule, successful forest management requires 



larger estates than the cultivation of field crops. 



Bearing these matters in mind, attempts may be made to 



determine the rate of interest for the forest industry in one of 



the following ways : — 



(1.) Determination based upon the rental and value of the 

 forest. 



If the value, F, of a forest, so managed as to yield an 

 annual net return Ft, is known from a sale, which has taken 

 place, the per cent, would be : — 



p = ^ X 100. 

 r 



The conditions for the applicability of the method are : — 



{a.) That the annual rental of the forest is accurately known. 



{h.) That the forest is, at any rate approximately, in such a 

 condition, that it can yield a steady annual return. 



(c.) That the price realised for the forest was the result of 

 genuine competition. 



There is great difficulty in complying with all these con- 

 ditions, so that frequently this method is not of much 

 practical value. 



(2.) Determination based upon the rate of interest obtain- 

 able in agriculture. 



As indicated above, differences exist between the two methods 

 of using the soil, which are difficult to estimate. At the 

 same time, forestry and agriculture resemble each other in 

 many respects, so that the agricultural rate of interest can 

 frequently be applied to the forest industry. 



(3.) Determination according to the rate of interest yielded 

 by Government securities. 



The rate of interest of Consols may be too high in some 

 5, and too low in others, according to the general credit 



i2 



