6%
Gross return = $7.00 Gross return = $7.00
5 X .53 = 2.65 5 X .94 = 4.70
----- -----
$4.35/.101 = 43c $2.30/.152 = 15c
Example 3: Assuming that stumpage will be worth $6.00 in 50 years,
and that public enlightenment will keep the annual fire and tax
charge from exceeding 20 cents, what price obtainable for cut-over
land today, made to earn 5 per cent compound interest in some other
business, is as profitable as keeping the land for a second crop?
If other business would earn 6 per cent?
5% 6%
Gross return = $6.00 Gross return = $6.00
20 X .102 = 2.04 20 X .142 = 2.84
----- -----
$3.06/.56 = $7.07 $3.16/.90 = $3.51
FUTURE STUMPAGE PRICES NECESSARY TO MAKE DOUGLAS FIR SECOND CROP
PAY EITHER 5 OR 6% COMPOUND INTEREST ON INVESTMENT.
Maximum Original Investment $7.50 an Acre. Maximum Annual Carrying
Charge 30c an Acre.
------------Cost per M Feet-----------
Taxes and 50 year 60 year 70 year 80 year
Original protection rotation rotation rotation rotation
investment paid yearly (20.5 M (35 M. (46.6 M (56.5 M
per acre. per acre. per A.) per A.) per A.) per A.)
(cents)
- - 10 $2.40 $2.35 $2.90 $3.90
| | 15 2.95 2.85 3.50 4.80
| $2.50 < 20 3.45 3.35 4.15 5.65
| | 25 3.95 3.85 4.75 6.50
| - 30 4.45 4.35 5.40 7.35
|
| - 10 3.80 3.65 4.50 6.10
5% | | 15 4.35 4.20 5.15 6.95
Compound < 5.00 < 20 4.85 4.70 5.75 7.80
Interest | | 25 5.35 5.20 6.40 8.70
| - 30 5.85 5.70 7.05 9.55
|
| - 10 5.20 5.00 6.15 8.30
| | 15 5.75 5.50 6.75 9.20
| 7.50 < 20 6.25 6.00 7.40
|