INTEREST RATE 25 



business, if he feels that he ought to make 10% on his money he 

 will want to sell out. 



In this case it is a matter of experience and fact, with $300 in- 

 come 5% is what the farm made on $6,000 cost price. If now a man 

 wishes to buy this farm and is shown that the farm made $300 net 

 income per year he may say : the farm is good for $300 per year, 

 is a safe property, I may as well put my money into this farm as 

 keep it in the bank at three per cent. To him the income value of the 



$300 



farm is: - - or $10,000 and he may be. satisfied to pay this price. 

 0.03 



To another man who values his money at 6% the farm is worth 

 only half this amount. In this case the three per cent or six per cent 

 are set by the man who wishes to buy the farm and judges its value 

 by the income it makes and a per cent which he determines himself. 



In forestry, too, these two fundamental cases of determining 

 interest rate occur and very commonly are both present in the same 

 calculation. 



If a planted stand of pine sixty years old is ready to cut and 

 worth $300 per acre the owner may want to know what per cent 

 was made on the investment. He knows that it cost $10 to plant, 

 that the land cost $20 per acre and that it cost 60 cents per acre each 

 year to take care of the forest and pay taxes. The ten dollars for 

 planting have been out at compound interest for fifty-nine years, 

 and the question arises at what per cent? Evidently it is for the 

 man to choose this per cent. When the calculation is finished and 

 he finds that all expenses for the sixty years amount to $180 per 

 acre he can find the net income and real value of his business. 



The calculation of what interest rate a stand of timber actually 

 makes or has made is comparatively simple and there is little dis- 

 agreement as to method. But what per cent to assume or set in 

 calculations of forest valuation is quite a different question, and the 

 opinions often differ and have differed since valuation began. 



To choose a high rate, such as the current rate of interest paid 

 by business men and farmers gives the calculation a business-like 

 air and seems practical. But even the reasonable rate of five per cent 

 will seem to prove most forestry a failure or lead to a demand for 

 absurdly low rotations, etc. To choose a low rate, say two or three 

 per cent, is unpopular, seems to discredit forestry, sounds theoretic 

 and unpractical. 



But the choice must be made, forest valuation is impossible 

 without it. The man who puts money into land and timber for for- 



