64 FOREST VALUATION 



4. Net income per acre at end of rotation or net value of the 

 stand then, $555 $64 or $491. 



5. Present value of the stand on basis of expected income : 

 Final value discounted to date, or 



I.02 



Value of the stand on 80 acres $16.160. 



6. This calculation may be put in a general formula : 



mG _YT-4-Ta(i.opr-a)4-Tb(i.opr-b) etc. (Sc + E) (i.op r - m i) 



i.op r - m 



where m Ge means the expectation value of one acre of growing 

 stock, m years old. 



7. It is evident that proper allowances must be made in esti- 

 mating future incomes, i.e., that these values must be reasonably 

 conservative. It also appears that if, in the above case, $202 per 

 acre is paid and the values are secured as per estimate, the buyer 

 does not make anything over and above his two per cent on all in- 

 vestment. Evidently then, the full expectation value is the maxi- 

 mum which can be paid for the stand. 



Where risks of injury from fire, etc., are great, such risks are 

 allowed for in the calculation by proper deduction from the values 

 of the final yield and thinnings. 



d. Which value to use. 



In selling and buying a house the owner first considers the cost 

 value or what the property cost him. The buyer cares little or noth- 

 ing about this cost value but considers the market or sale value or 

 else the value which he may make on the property. So in the valua- 

 tion of the stand of timber. The buyer does not care whether the 

 cost of planting was high or low, and how much expense the owner 

 had in care, protection, taxes, etc., he merely cares about the values 

 which he can make out of the timber, the sale or expectation value. 



This situation is complicated by the uncertainties of a living 

 crop. Commonly the age and condition of the stand decide. If a 

 stand of pine ten years old is injured or destroyed the question 

 almost naturally is what did it cost to reproduce or grow it, what 

 will it cost to replace the stand, i. e., what is the cost value? 



In older stands it is the sale value which determines. But in 

 many cases, especially in new districts, as in the far west, it often 

 happens that even a fine, mature stand of timber has no sale value 



