74 FOREST VAl,trATlON 



here there is a doubt as to whether part of this seven per cent profit 

 is not a personal matter. 



These few cases suffice to show that the matter of profit is not 

 as simple as it seems ; a great variety of combinations necessarily 

 arise, there may be profit even though there is no sale of property, 

 and also there are various viewpoints possible. 



f. A man buys a house for $5,000, he borrows the entire sum, 

 giving the house as security. In one month he sells the house at 

 $7,500, and returns teh cash with a few dollars interest. The profit 

 is practically $2,500 and is not made on any real investment on his 

 part. It is usually stated that his credit is used, etc., but in many 

 cases this is not true at all ; the capitalist does not trust the man but 

 considers the house good for the money. 



It is neither ordinary profit nor wages but a special form of 

 profit paying him for his enterprise, shrewdness or more often his 

 good luck, exactly as in gambling. 



2. Profit from income producing properties. 



a. In case under i, c, a house is bought at $1,000, the interest 

 rate is 5%, the net income $So or 8% on the money invested, the 

 yearly profit is $30 or 3%. The cost value of the house. He is $1,000, 



80 



income value He is or $t,6oo, the total profit is $1,600 — $1,000 



•05 



or $600 and may be stated as He — He. 



b. A forest property is bought at $250,000, it produces $10,000 

 per year or 4% on the investment, net income. Whether this would 

 be regarded a profitable investment or not depends on the purchaser, 

 chances for investment, the current rate of interest, etc. In central 

 Europe it would be considered an excellent property, in the United 

 States at present, it would be considered poor, in the west, barely 

 paying in the middle states, fair in the east. Any one who could 

 easily get five per cent on his money would not buy this property, 

 and would certainly not speak of a profit in this case. 



Assume now that the property yields $20,000 per year or 8%, 

 then the case is similar to that of the house, i. e., 

 Cost value of forest, $250,000. 



20,000 



Income value or 400,000. 



■OS 



