CHAPTER 28 

 Economic feasibility analyses^ 



To utilize significant volumes of the hardwoods that grow where southern 

 pines grow, economically viable enterprises using hardwood feedstocks typical 

 of the region must be conceived, designed, financed, built in large numbers, and 

 successfully operated. Examples of such operations are not easily documented, 

 because there are so few of them. Were they more numerous, preparation of this 

 text would have had lower priority. 



To stimulate some imaginative and organized thinking about the design of 

 enterprises capable of profitably operating on the low-grade hardwoods typically 

 found among southern pines, a symposium was organized to synthesize enter- 

 prises with promise of economic success'. Speakers at the symposium were 

 instructed that their target profit (return on investment) before income taxes 

 should be at least 30 percent of total investment required, assuming no debt. 

 While this target was not achieved by all the synthesized enterprises, most of 

 them met or surpassed the threshhold return. 



The enterprises proposed ranged in capital investment from $120,000 to 

 $94,000,000. Those selected for abstracting in this text are assembled in order 

 according to investment required, from small to large. Several of them (see sect. 

 28-5, 28-6, 28-7, 28-9, 28-10, 28-20, and 28-33) are designed to manufacture 

 energy-related products. The first paper abstracted (sect. 28- 1 ) does not describe 

 an enterprise, but tabulates the costs of operating a $ 1 3 ,000 farm tractor on wood 

 gas. 



Stumbo (1981a), in his preface to the 1980 symposium proceedings,' noted 

 that one objective was to present the economic analyses in a standard format 

 using similar economic evaluations to allow more direct comparison of results. 

 To a large extent this was accomplished. Return on investments and return on 

 sales were calculated on a typical year basis without incorporating income tax, 

 investment credits, or interest on investment. 



The reader is cautioned, however, that exact comparisons of the economic 

 data could be misleading. These data are offered as a guide to economic feasibil- 

 ity and as such should be helpful. But, the individual economic analyses have 



^The feasibility analysis in this chapter, with three exceptions, are abstracted from papers con- 

 tained in the Proceedings of a Symposium held October 6-8, 1980 in Nashville, Tenn. (Stumbo 

 1981a). The Symposium, "Utilization of Low-Grade Southern Hardwoods — Feasibility Studies of 

 36 Enterprises", was sponsored by the Mid-South Section of the Forest Products Research Society, 

 the Agricultural Extension Service of the University of Tennessee, and the Southern Forest Experi- 

 ment Station of the U.S. Forest Service with the cooperation of the Forest Products Research 

 Society, the Southeastern Area State and Private Forestry Branch of the U.S. Forest Service, the 

 Hardwood Research Council, and the Tennessee Division of Forestry. The abstracts are reproduced 

 in somewhat modified form by permission of the authors and the Forest Products Research Society. 

 Readers needing more data about the enterprises described should consult the source documents. 



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