feet (about 10,000 board feet) in 55 years (at It is estimated that with pruning the value of 

 age 75), and a harvest cut of 1 1,000 cubic feet the harvest cut would be increased 65 percent. 

 ^0,000 board feet) in 80 years (at age 100). The costs and yields are summarized as follows: 



Costs 



Thinning 

 Pruning 



Yields Age 



1 st thinning — 



2nd thinning 



Without pruning — 



With pruning — 



Harvest 



Without pruning 1 00 



With pruning — 



No management 



Volume Quality index 

 (M bd.ft.) 



30.0 



.90 



With management 



(Dollars) 

 26.00 



30.00 



Year 



35 



55 

 55 



80 

 80 



Volume 

 (M bd.ft.) 



5 



10 

 10 



70 

 70 



Quality index 

 0.20 



.80 

 .85 



1.10 

 1.75 



Basic stumpage price = $10 per thousand board feet changing at the rate of 0.5 percent per year. 



The questions the manager would want 

 answered are (1) What will the additional 

 merchantable yield resulting from thinning 

 mean in terms of rate of return — in other 

 words, what would be the rate of return on 

 the added expenditure required to do the 

 thinning? and (2) Would the value that could 

 be added by pruning be sufficient to justify 

 the expenditure? 



The manager could work the problem out 

 by hand, or he could describe his plans in such 

 a way that they could be submitted for solu- 

 tion by computer. For example, in one com- 

 parison a timber growing program requiring 

 thinning only can be compared with a timber 

 growing program requiring no cultural work. 

 A second comparison can be made between 

 a timber growing program that includes both 

 thinning and pruning with one requiring no 

 cultural work. 



Figure 6 shows the output and illustrates 

 the nature of the machine calculation. Present 

 discounted net worth for each timber growing 

 program, in the comparisons for the range of 

 interest rates specified, is shown first. The 

 program then computes the present discounted 

 net worth of the difference due to the added 

 treatment for the range of interest rates speci- 

 fied. The interest rate shown at the point 

 where present worth of the difference changes 

 from a positive to a negative value is the rate 

 earned. In the case of thinning compared with 

 a plan of management that did not include 

 thinning, the rate of return on the input for 

 thinning is between 5.2 and 5.3 percent. The 

 input for thinning and pruning in the second 

 comparison would earn between 4.5 and 4.6 

 percent indicating that pruning only lessened 

 the financial value of the timber growing 

 opportunity. 



20 



