Joe Smith Was An Offer To Sell Some Of His Timber
Case Study 1: Tree Values
Within this case, forest landowner Joe Smith was given an offer to sell some of his timber. Within his forest he has a variety of trees, according to Karen Benet only a select few of his trees are worth selling. The central problems Mr. Smith faces are how many of his trees he should sell, and when he should sell them. According to Ms. Bennett, Mr. Smith has 300 trees per acre, but only 60 crop trees per acre, out of 40 acres. Out of these 60 crop trees, 30 are 12” DBH and the other 30 are 14” DBH. The 12’ DBH trees are grade 4, and within the 14” DBH trees 40% are grade 4 and the other 60% are grade 3. Smith is faced with two options, to sell what he has now or to wait so that the value and grade of his trees …show more content…
Smith has to make a decision in how to proceed if he wants to sell or keep the trees. Mr. Smith can either sell immediately, allow his forest to continue growing in an unmanaged state, and sell later, or thin the forest down to sell some time down the line. If Mr. Smith decides to allow the forest to grow unmanaged, the trees will grow but they will be of less value relative to their value if they were managed. Individually the value of the trees are based on the tree grade and the trees MBF, the lower the grade and the higher the MBF the higher the value of the tree will be. During the analysis, we will focus on the present value because it shows the amount of money Mr.Smith will receive for the trees during the time of the …show more content…
The starting value of the trees is still $14,496. According to the combined present value the best time to sell his trees would be in 30 years. Individually, over 30 years the 12” DBH trees will grow to 18” DBH, the present value will increase from $2,880.00 to $16,338.83. The 14” DBH trees will grow to 20” DBH, the present value will increase from $11,616 to $47, 847, after this the prices begin to decrease. If we look at graph 1, we can see that the highest combined present value is $73,156.64. This is the point where Mr.Smith should
Within this case, forest landowner Joe Smith was given an offer to sell some of his timber. Within his forest he has a variety of trees, according to Karen Benet only a select few of his trees are worth selling. The central problems Mr. Smith faces are how many of his trees he should sell, and when he should sell them. According to Ms. Bennett, Mr. Smith has 300 trees per acre, but only 60 crop trees per acre, out of 40 acres. Out of these 60 crop trees, 30 are 12” DBH and the other 30 are 14” DBH. The 12’ DBH trees are grade 4, and within the 14” DBH trees 40% are grade 4 and the other 60% are grade 3. Smith is faced with two options, to sell what he has now or to wait so that the value and grade of his trees …show more content…
Smith has to make a decision in how to proceed if he wants to sell or keep the trees. Mr. Smith can either sell immediately, allow his forest to continue growing in an unmanaged state, and sell later, or thin the forest down to sell some time down the line. If Mr. Smith decides to allow the forest to grow unmanaged, the trees will grow but they will be of less value relative to their value if they were managed. Individually the value of the trees are based on the tree grade and the trees MBF, the lower the grade and the higher the MBF the higher the value of the tree will be. During the analysis, we will focus on the present value because it shows the amount of money Mr.Smith will receive for the trees during the time of the …show more content…
The starting value of the trees is still $14,496. According to the combined present value the best time to sell his trees would be in 30 years. Individually, over 30 years the 12” DBH trees will grow to 18” DBH, the present value will increase from $2,880.00 to $16,338.83. The 14” DBH trees will grow to 20” DBH, the present value will increase from $11,616 to $47, 847, after this the prices begin to decrease. If we look at graph 1, we can see that the highest combined present value is $73,156.64. This is the point where Mr.Smith should