Question

Use the information given below to determine the financially or economically-optimum age to harvest this stand using the following relationship:

(V₁ - V₀) = (V₀ - C)r + Sr

Where:

V₀ = value of timber at time 0

V₁ = value of timber at time 1

C = harvest cost

S = land sale price

r = discount rate

1-When should this stand be harvested to maximize economic value if only the timber and the land are considered (i.e., no non-market benefits are considered)?

2- When should this stand be harvested to maximize economic value if the timber, land, and wildlife values are considered?

3- If the wildlife benefit associated with an unharvested forest decreases to $10/acre/yr, identify when this stand should be harvested to maximize economic value if the timber, land, and wildlife values are considered

4- If the wildlife benefit associated with an unharvested forest is $100/acre/yr, how much additional value is gained by letting the stand grow from age 55 to 56 years compared to if you harvest the stand at age 55?

5- If the discount rate is increased to 5%, when should this stand be harvested to maximize economic value if only the timber and the land are considered (i.e., no non-timber benefits are considered)?

Discount Rate = 2%

Stumpage Price = $2 per ft³

Residual Land Value After Harvest = $1,000 per acre

Harvest Cost = $300 per acre

Wildlife Benefit if Stand Isn't Harvested = $30 per acre per year