139 



CHAPTER IV. 



THE VALUATION OF TIMBER- CROPS AND OF WOODLANDS. 



Valuation of woodlands, whether as separate crops of timber 

 or as a whole, is made by means of formulae based upon the 

 general formula for summarising a geometrical progression 



1 r n 



S = a- 



1 r 



There are various specific formulae which may be applied in 

 problems affecting the valuation of woodlands, but in practice 

 all calculations are made by means of compound interest tables, 

 as shown on page 151 (Appendix II.). Some of these summarise 

 or calculate the future value of a capital, while others discount 

 or calculate its present value ; and others again permute or 

 convert a periodic return into an annual rental. 



In forestry valuations, the summarising, discounting, and 

 permutation must all be done by compound interest ; and it is 

 best to take 3 per cent as the usual rate of interest. Calcula- 

 tions on this basis usually prove forestry under good manage- 

 ment to be profitable ; and the larger the area, the greater is 

 generally the profit. By arbitrarily raising or lowering the 

 rate of interest used in calculations very divergent results are 

 obtained (e.g., a plantation costing 5 an acre would at 20 

 years of age have cost 9 -03 at 3 per cent, and 10-95 at 5 

 per cent), and the difference is, of course, all the greater when 

 long periods of years are being dealt with. 



