FOREST FINANCE 2T 



is coppiced under a rotation of about 10 years. The very prime trees, notably 

 hardwoods, of a primeval wood are immature from a financial standpoint, 

 if the owner believes that the greatest advance in prices will come to them, 

 such giants getting rare and more rare, year by year. 



In many cases, the price of inferior stumpage does not promise to rise as 

 much as the price of prime stumpage. On the other hand, in many a case, 

 the indicating percentage of trees promising a large percentage of "cull lum- 

 ber" is manifestly superior to that of trees containing a large percentage of 

 "fas lumber". 



In Europe, the question of maturity is largely a question of age or (which 

 is almost the same) of diameter. In America, on the other hand, the question 

 is one of conditions — condition of transportation, danger from fire, condition 

 of health, the chances for their improvement or deterioration. Thus, a diam- 

 eter limit or age limit can scarcely denote maturity. The American forester 

 in charge of large districts is confronted many a time with the necessity of 

 treating individual trees according to their financial merits, whilst his Euro- 

 pean colleague in charge of small ranges has to deal with even aged aggre- 

 gates resulting from second growths. 



VI. — The term "indicating percentage" denotes the current dividend obtain- 

 able from a tree or woodlot. This percentage indicates the maturity of a 



tree or of a woodlot. 



A tree or woodlot is mature and should be removed when it ceases to yield 

 (latently, of course) the dividend desired by the owner. 



The owner or investor discards an investment in forestry as well as in 

 stock when the dividend seems to fall below the limit obtainable by him in 

 other enterprises of similar safety. If he discards at the right time, he will 

 make money; and otherwise not. 



In the following remarks, the indicating percentage is called "z"; the 

 forest percentage denoting the "limit" just mentioned is called "p". 



Previous to maturity, "x" is larger than "p"; at maturity, "x" equals 

 "p"; after maturity "x" is smaller than "p". 



The indicating percentage of a woodlot, for a period of 10 years, is as 

 follows, if the stumpage is now worth "S.S." dollars; if it is worth, after ten 

 years, "S.Siq"; if the cleared soil is worth "C" dollars; if administration and 

 taxes are "v" dollars per annum, forming an administrative capital "V": — 



(SS+C+V) 1.0x"=SSio+C+V or 



(l.Ox"— 1) 



(SS+C) 1.0x"+v -C+SSio 



O.Ox 



According to Krafit, the indicating percentage had better be considered 

 as a dividend on stumpage merely whilst the soil and the administrative cap- 

 ital should yield the forest dividend required by the owner. 



Krafit's "x" is more sensitive than the "x" commonly applied since it 

 bears a ratio to part of the investment only. Krafit's "x" is found as follows: — 

 SS X 1.0x"h-(C+V) 1.0p"= SSio+C+V 



