A RED FIR PROBLEM (OREGON). 



PREMISES : Mr. W r, a Michigan lumberman, had a 



chance to acquire, in 1862, 200,000 acres of splendid white pine forest, 

 at 40c per acre. He had made 7 per cent, on the investment, and a 

 total net gain of $1,200,000 when the last tree was cut in 188S. 



In 1900 Mr. W r moved to Oregon, and had a chance in the 



Cascade backwoods to exactly repeat the speculation of 1862, buy- 

 ing 200,000 acres of splendid Douglas fir, scaling 30,000 feet board 

 measure per acre, at 40c per acre. 



The value of the denuded land, in Michigan and Oregon, is nill. 

 Taxes ic per acre per annum. 



QUESTION : What must be the development of stumpage 



prices in the section referred to, if Mr. W r is again to make a 



net gain of $1,200,000 in addition to deriving 7 per cent, from the 

 investment, in the course of 26 years 7 



POINTS : 



The answer depends on the rate, at which the railroad system 

 in the section will be developed, by the establishment of which the 

 gradual removal of the timber will be made possible. 



I. Suppose cutting begins after 16 years, in 1916 and ends in 

 1926. 



1. The average cut will be 600 million feet board measure per 

 annum, worth 6oo,oooX. The receipts for stumpage, in 1926, will 

 have accumulated to 600,000 X (1.07'° — i) 



0.07 



2. The accrued expense for taxes will be, at ic per acre per 

 annum, 2000 (1.07'" — i) 



0.07 

 if we assume, that taxes on the whole land are paid until 1926. 



3. The original price paid for the land, $80,000, has grown up, 

 at 7 per cent, compound interest, to year 1926, to $80,000 x 1.0726. 



EQUATION : 



6oo,oooX(i.o7'°— I) 2000 (1.0726—1) 

 1,200,000 = — - ~ _ 80 000 X 1.07' 



RESULT : The stumpage price of Oregon pine, in that sec- 

 tion, must average about 22 cents per 1000 feet board measure, from 

 16 years from to-day on. 



II. Suppose cutting begins after 10 years, in 1910, and ends in 

 1926. 



1. The average cut will then be 6,000,000,000 =375 million feet 



16 



,26 



