Financial Maturity of Single Trees

FNR 407 2016 Lab Exercise 5 Financial Maturity of Single Trees

Determine the rate of interest (ROI) earned by holding crop trees over 10-year increments, and the point at which financial maturity is reached assuming a minimum acceptable annual compound rate of return of 5%. Grow them until they are 30 inches DBH. Also determine the present value as of year 0 for the value of the trees.

Select two species to work with.

Information provided:

Doyle log volume equation by log length and dib

Doyle is log rule is,

bf = [(D-4)2] * (L/16) D – DBH, L – length of log

Tree form factor – 85, i.e. dib at 16 ft. is 85% of DBH

Log values from 2015 Indiana Forest Products Price Report, attached.

Expected diameter growth rates:

Species Current DBH 0 to 12 12 to 16 16 to 20 20 and larger White oak 0.25 0.20 0.15 0.10 Black walnut 0.5 0.5 0.45 0.40 Red oak 0.45 0.4 0.35 0.35 Tulip poplar 0.55 0.55 0.50 0.45 Beech 0.35 0.35 0.3 0.25

Assumptions:

(1) All logs are 8.0 ft. bucked length. (2) DBH is inside bark. (3) See table for log grades to use (4) Logs under 8 inches dib have no value (5) Use 1-inch dib classes by rounding (6) dib at 16 ft., 2nd log, is based on form class of 85 (8) dib at 8 ft., 1st log, is average of DBH and dib at 16-ft (9) dib at 32 ft, 4th log, is form class 85 of dib(16) (10) dib at 24 ft., 3rd log, is average of dib’s of 2nd and 4th logs (11) Logging and hauling cost is $120 per MBF (12) Obtain equivalent stumpage prices by subtracting $120 for logging and hauling cost.

32 ft., dib(32) = 0.85 x dib(16)

4th log

24 ft., dib(24) = (dib(32) + dib(16))/2

3rd log

16 ft., dib(16) = 0.85 x DBH

2nd log

8 ft., dib(8) = (DBH + dib(16)) / 2

1st log

DBH In your spreadsheet highlight the year in which the trees are financially mature.

Log grade assumptions for financial maturity exercise All log grades are Purdue Log grades as used in the Indiana Forest Products Price Report and Trend Analysis. Abbreviations for sawlogs: P - Prime, 1 - No. 1, 2 - No. 2, 3 - No. 3 Abbreviations for veneer logs: VS - Select veneer log with price also a function of dib of log VP - Prime veneer log with price also a function of dib of log Species Log dib 1st 2nd 3rd 4th Log, Log Log Log Butt Black walnut 8 3 3 3 3 9 3 3 3 3 10 2 2 2 3 11 2 2 2 3 12 VP 2 2 3 13 VP 2 2 3 14 VP 1 1 3 15 VP 1 1 3 16 & > VP P 1 3

White oak 8 3 3 3 3 Log grades for larger dib’s same as black walnut Red oak 9 3 3 3 3 Log grades for larger dib’s same as black walnut Tulip poplar 10 3 2 3 3 11 3 2 3 3 12 1 2 2 3 13 VS 2 2 3 14 VS 1 2 3 15 VS 1 2 3 16 &> VP P 2 3

Beech 8 3 3 3 3 9 3 3 3 3 10 3 2 3 3 11 3 2 3 3 12 2 2 3 3 13 2 2 3 3 14 2 2 3 3 15 1 2 3 3 16 &> P 1 3 3