90 FOREST VALUATION 



But where timber was bought years ago, in advance of cutting, 

 the present cost value involves : price paid ; interest, compound, us- 

 ually 5-6% in the United States ; taxes with compound interest ; care 

 of property, of late some money for fire protection, with interest; 

 losses by fire, theft, insects, windfall, etc. 



Part of these losses is made up by growth, but in most cases 

 it is not safe to figure on any material growth. On large areas the 

 growth is usually balanced by decay, on smaller areas, the decay or 

 loss may far outrun growth, as in timber infested by insects, etc. In 

 these cases only a detailed examination determines the true status. 

 Leaving out this very uncertain element of losses by fire, etc., the 

 cost value results in a case approximately like the following : 



Area, 2,000 acres ; price paid 10 years ago, $40,000 ; 



Present value of this 40,000 (1.05^°) =$65,160; 



Taxes at il4% on half cost price, $300 per year; 



Care of property by some local agent, lawyer, etc., together with 

 expenses of fire control and occasional visit by cruiser, etc., $200 

 per year. These two items with interest : 



(i.05"-i) 



(300 + 200) = $6,200, 



1.05— I 



Total cost, $71,360, or nearly double the original cost price. 



This explains a common phrase among timber owners in the 

 United States — that the value of a property must double every ten 

 years if there is to be no loss. 



B. Sale value of stumpage. 



This may be considered under two heads : 



The ordinary market price of stumpage as determined by actual 

 sales. 



The stumpage value for immediate use as determined by an an- 

 alysis of the various factors entering into, or affecting this value. 



I. The ordinary market price of stumpage should approxi- 

 mate: value of lumber at mill — cost of logging and milling, where 

 a proper profit, etc., forms part of costs. 



But so far the market price of stumpage has not been deter- 

 mined in this way. Probably more than ninety per cent of all stump- 

 age bought during the past twenty-five years was paid at prices quite 

 independent of the prices of lumber and cost of logging, and deter- 

 mined chiefly by the activity of large buyers. A number of causes 

 contributed to this peculiar condition. Large quantities, thousands 

 of acres of fine stumpage were secured without pay from the United 



