82 FOREST VALUATION 



To illustrate : Cut over lands in the southern states may be bought 

 at $2 per acre. The Se even on a very conservative basis is $20 

 per acre. To a company financially able to hold and develop such 

 lands as forest properties the enterprise would make : 



20 



P* = 3 = 30 % on the cost value of the land. 

 2 



It should be noted that p in this case should be the p employed in 

 calculation of Se, and also that the p x , the 30% in the above case, 

 is the interest made only on the cost value of the land, on Sc, and 

 that the other parts of the investment, costs of planting, taxes, pro- 

 tection, etc., produce simply p the accepted rate of interest, usually 

 3% in these studies. 



C. COMPARISON OF PROPERTIES WITH YEARLY 

 AND WITH INTERMITTENT INCOME. 



The great advantage of having any kind of business in a condi- 

 tion of producing approximately equal and yearly incomes is quite 

 evident. Ordinarily an enterprise is not considered a business at 

 all until it does produce a yearly income at least balancing expenses. 

 In most cases it is difficult to interest and enlist financial support or 

 purchasers unless there is an assured yearly return at least equal to a 

 conservative rate of interest, except in cases where a body of nat- 

 ural wealth is in view, as in standing timber, coal veins, etc., or else 

 in cases of great possibilities or probabilities where the element of 

 lottery or gamble enters. Financial concerns under public control 

 are generally forbidden to lend on securities of this kind. The reg- 

 ular yearly income has been, therefore, one of the aims in forest 

 business and forms one of the principal tasks of forest regulation. 

 Merely to emphasize and illustrate this fact the following concrete 

 case is here considered. 



Assume two properties of 1,000 acres each; rotation 80 years; 

 p, 3%; Yr, $400; Sc, $10; average growth of ripe stuff per acre, 

 one cord per year, value per cord, $4; cost of planting, c, $10 ; cur- 

 rent expenses, e, $i per acre. Thinnings left out for sake of sim- 

 plicity. 



