| Age of Stand. | Feet, B. M. | Age of Stand. | Feet, B. M. |
| 40 | 12,400 | 90 | 70,200 |
| 50 | 28,000 | 100 | 79,800 |
| 60 | 41,000 | 110 | 90,300 |
| 70 | 51,700 | 120 | 101,500 |
| 80 | 61,100 | 130 | 113,000 |
Let us see how these figures can be used in answering the primary question of the prospective timber-grower: "Will it pay to hold my cut-over land for a second crop?"
Obviously no certain answer can be printed here, not only because no uniform stumpage prices or carrying charges can be predicted but also because individuals may differ as to what profit is necessary to make the investment "pay," so it will be necessary to analyze the situation so each may select the premises which suit his own case and judgment. The investment made by the holder of cut-over land is of two kinds; that represented by the land which otherwise he might sell, putting the proceeds at work in some other business, and the annual carrying charges which otherwise he might also invest differently. The sum obtainable by investing the money available by sale after logging, adding to it yearly the sum required for fire prevention and taxes, and compounding both at a satisfactory interest for the entire period, is practically the cost of holding the tract for any given number of years. By calculating this cost upon a basis of one acre, and dividing it by the yield board measure which the same period will produce, the cost per thousand feet of growing a second crop is arrived at.
Against this may be set the gross return from the same expected yield at any given stumpage rate. The yield at the end of a 50-year investment will not be that of a 50-year forest, however, for although the carrying cost begins at once, the new forest requires a few years to become established. No exact figure can be set for this, for some seed will sprout the first year and some blank spaces may persist several years, but in the tables to follow five years has been allowed for an average. Consequently, instead of calculating on a 28 M yield as the return at the end of 50 years, as indicated in the yield table on the preceding page, the 45-year yield of 20-1/2 M is used, and similarly for the other periods of 60, 70 and 80 years. These four rotations only will be considered here, for in less than 50 years second growth will probably be too small to be cut at the highest profit, while after 80 years the investment compounds so heavily as to make it improbable that increasing stumpage values will compensate.
Three interest rates have been used in the first table to follow: 4, 5 and 6 per cent, compound. Forest calculations at lower rates are often seen, but it is not believed that less than 5 per cent will be satisfactory to private owners and many will insist on 6 per cent. The fair standard is what the owner can make in other business today, and since he can reinvest his income in the same business, it is reasonable to figure at a compound rate. A few examples are given to show how similar calculations may be made with any set of investment and stumpage factors which appeal to individual judgment. The second table, prepared from the first, shows at a glance the price that must be received for Douglas fir to make it pay either 5 or 6 per cent compound interest under a range of sixty different conditions of original investment and annual cost.
It should be borne in mind that, although present land value is made a charge, the value of the land at the time of harvest is not considered. This value is certain to increase greatly in the long periods involved. Taxation charges will be against it as well as against the timber. Indeed much land is now held without any regard to possible second growth. It should be assumed therefore that any profit in forest investment shown will be increased by the sum obtainable for the land at the end of the same period.
| Cost per M of growing Douglas fir resulting from every $1 per acre originally invested. | Cost per M of growing Douglas fir resulting from every 1 cent per acre of annual carrying charge. | |||||||||
| At the end of | At the end of | |||||||||
| 50 Years. | 60 Years. | 70 Years. | 80 Years. | 50 Years. | 60 Years. | 70 Years. | 80 Years. | |||
| At 4% | $ .35 | $ .30 | $ .33 | $ .41 | $ .074 | $ .068 | $ .078 | $ .098 | ||
| At 5% | .56 | .53 | .65 | .88 | .102 | .101 | .126 | .172 | ||
| At 6% | .90 | .94 | 1.27 | 1.87 | .142 | .152 | .208 | .309 | ||
Example 1: With land worth $2.50 an acre at present, and an estimated carrying charge of 3 cents a year for protection and 20 cents per taxes, what stumpage price for a 50-year crop will pay 5 per cent compound interest? 6 per cent?
| 5% | 6% | |||||||||
| 2½ | × | .56 | = | $1.40 | 2½ | × | .90 | = | 2.25 | |
| 23 | × | .102 | = | 2.35 | 23 | × | .142 | = | 3.27 | |
| $3.75 | $5.52 | |||||||||
Example 2: With land worth $5 an acre at present, and stumpage estimated to reach $7.00 in 60 years, what is the maximum annual carrying charge per acre which can be paid during this period and permit a 5 per cent return? A 6 per cent return?