94 FOREST VALUATION 



grades. Where several species are logged together such as hemlock, 

 maple and beech, etc., the proportion as well as the quality vary 

 from one tract to another. 



To use the general prices of the district and agree on some pro- 

 portion of kinds and grades is usually as far as the analysis can go. 



b. Cost of milling. 



This also involves various considerations differing radically for 

 different cases. In one case the logs go to an established mill, the 

 particular body of timber is only one of several or many which are 

 cut at this mill. The large mills along, or at the mouths of the 

 rivers in Michigan and Wisconsin are of this order. In this case 

 the cost of milling is quite simple, there is a regular market value 

 of this milling toll which is fairly well established. 



In other cases the mill is established to cut the particular body 

 of timber and no more, it must be torn down and moved away, is 

 largely a loss and with it also a number of other buildings, quarters 

 for men, boarding houses, office, store, shops, etc. In such a case 

 the cost of milling involves : 



1. Labor, material and repairs ; 



2. Depreciation of all buildings and machinery; 



3. Interest, taxes, insurance, supervision and profits. 

 Generally the direct cost of labor and materials is fairly well 



known, varies within narrow limits, mostly between $1.50 and $3 

 per M. feet b.m. 



The depreciation of mill and machinery and buildings may be 

 treated as follows : 



Mill and buildings may be assumed to last throughout the job, 

 the different machines may and may not need separate treatment. 

 Suppose the amount of stumpage sufficient to furnish 10 years cut- 

 ting. Let the mill and other buildings, including those machines 

 which are fairly certain to last the ten years be worth $150,000 and 

 let the interest rate be 5%. Then this outfit together with interest 

 costs at the end of the ten years : 



150,000 (1.05^°) — the wrecking value of the outfit. 



If the latter is $10,000, then the end value is 240,000 — 10,000 

 or $230,000. 



Usually we desire to know what yearly sum will take care of 

 this $230,000 and from this derive the cost of the depreciation per 

 M. feet of lumber. To get this wc may set for the above case: 



(1.05^"— I) 



yearly cost of depreciation = X and X = $230,000, and 



1.05 — I 

 from this X =$18,400. 



