Economics of Forestland Use and EvenAged Rotations. Land tends to be used for the activity that generates the greatest NPV of future satisfaction to the present owner. Once the land use is determined the same maximization of NPV defines how that use will be carried out. Stand Level Decisions.
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Land tends to be used for the activity that generates the greatest NPV of future satisfaction to the present owner.
Once the land use is determined the same maximization of NPV defines how that use will be carried out.
0.80x $1,000 + 0.20 x $500 = $900
t
t
Ry(1+r) (ty) 
Cy(1+r) (ty)
a – c
y=0
y=0
=
+
r
(1+r)t  1
Ny
t
∑
(Ry– Cy) (1+r) (ty)
a  c
y=0
=
+
r
(1+r)t 1
WPL∞ = Capital value of periodic series at interest rate r
If put WPL∞on right hand side as a cost, NPV = 0
t
t
Lt
Ry
Cy
∑
∑

+
(1+r)y
(1+r)y
(1+r)t
y=0
y=0
How much investor would pay for land assuming the land is sold at end of first rotation for Lt
WPL1 for sawtimber example = Excel Spreadsheet
PriceEarnings Ratios (P/E) for Stock
Annual forest value growth %
(Hy+1 +Ly+1) – (Hy + Ly) + (ac)
Hy + Ly
=
Example, Table 73
Without net annual revenue (ac)
1/n
(
)
Hy+n + Ly+n
Hy + Ly
Forest value growth %
=
 1
With net annual revenue (ac)
Must determine iteratively, like for IRR
ty
[
]
Rq
(1+r)q
Cq
(1+r)q
∑
HVy=

q=0
Optimum rotation age of land