STATE LOANS FOR FORESTRY PURPOSES. 



PREMISES : The state of P. decides to engage in state for- 

 estry, and to that end takes up a loan of $1,450,000, at 4 per cent., 

 which is to be used as follows : 



$1,000,000 for purchase of 1,000,000 acres at the headwaters of 

 the rivers, 



$ 50,000 for lawyer's fees, surveys, demarkation, etc., 



$ 150,000 for roads, etc., 



$ 250,000 for defraying the annual salaries of superintendents 

 and rangers. After the road system is developed, 12 years from 

 today, an annual revenue of 10 cents per acre per annum will be 

 derived, under conservative management, and it is expected that 

 this revenue will gradually increase at the rate of 3 per cent, per 

 annum. 



QUESTION: A: Within how many years will the forest 

 itself be able to redeem the loan ? 



B : What is the forest worth after the loan is 

 redeemed 7 



POINTS : 



1. The annual interest on the loan is $58,000. 



2. The revenue from the 12th year on is o. 10 x 1,000,000 •= 

 $100,000, of which $58,000 are used, from that time on, to pay the 

 interest on the loan, whilst $42,000 or more are available annually 

 for redemption of loan. 



3. As the revenue rises at 3 per cent, per annum, the receipts 

 are to be discounted at 4 per cent. — 3 per cent. ^ i per cent. 



EQUATION : . 42000 (i.oi- - i) _ 



• O.OI X I.OI" 



T, 100,000 X i.03*» „ 



a . = X 



O.OI 



RESULT ; A : The loan can be entirely redeemed within 43 

 years after the 12th year, or within 55 years from today. 



B : The forest, freed from all incumbrances after 

 55 years, and producing annually $356,000 with prospect of an 

 annual increase of revenue equalling 3 per cent., is worth about 

 $35,600,000. 



If the people are ready to spend $58,000 for 12 years, they will 

 gradually build up a very valuable forest. 



Far-leading calculations in forestry might seem fallacious and 

 absurd, if forest-history had not proved the very contrary. 



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