Cost per M of growing Cost per M of growing Douglas fir resulting Douglas fir resulting from every $1 per acre from every 1 cent per acre originally invested. of annual carrying charge. --------At the end of--------- --------At the end of--------- 50 60 70 80 50 60 70 80 Years. Years. Years. Years. Years. Years. Years. 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% 2-1/2 X .56 = $1.40 2-1/2 X .90 = $2.25 23 X .102 = 2.35 23 X .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? 5% 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.