COST VALUE. 137 



Immediately after the area has been stocked m the beginning 

 of the rotation, the expectation value of the growing stock is 

 equal to the cost of formation, and at the end of the rotation it 

 is equal to the value of the final yield. 



iv. The Rate of Interest with which the Calculation is made. 

 A high rate of interest gives a low expectation value of the 

 growing stock, and vice versa, similar to what has been shown 

 for the expectation value of the soil. 



2. Cost Value of tlie Groiv'uKj Stock of a Sin<jle Wood. 



The cost value of the growing stock of a wood now m years 

 old is equal to the present value of all costs of production, less 

 the present value of all returns, which the wood has yielded 

 before the year m. 



a. MetJwd of Calculuiion. 

 Costs of Production. — (1.) The present value of the rent of 

 the soil during m years comes to — 



S X 1-0//" - ,S' = S {VOp"' — 1). 



(2.) The present value of the annual expenses during m 

 years (see Formula lY.) — 



= e X l-O^y-i + c X l-0y"-3 + . . . + c', 



=^{i-Oir-i)=E{i'Qf^-i). 



Op 

 (3.) Present value of cost of formation — 

 = c X l-Ojj'". 



lieceipts. — These consist of all previous thinnings and items 

 of other incomes realised before the year m ; they may be 

 represented by T„, 7\ . . . 2\. Their present value is — 

 = r„ X 1-Oi/'-" + 2\ X VOp'"-' + ...-\-TiX 1-Oir-K 



Should any items of income have occurred in annually equal 

 amounts, such as shooting, grazing, etc., they can be summed 

 up according to Formula IV., or, better still, be deducted 

 from the annually recurring expenses. 



