Module 5.1 to 5.2 Flashcards
What is the 2 basic capital of any forest enterprise?
- Timber stand
2. Land
Valuation of land and timber is a large concern because investments are ____, relatively ____, and entail in ___ the many responsibilities of _____
heavy, permanent, full, land ownership
The ____ nature of timberland investments makes ____ and _____ of appraisal techniques particularly important
long-range, careful, searching application
2 Ways of Valuating Forest Land and Timber Stand
- Timberland market values
2. Foreas areas on a permanent timber growing basis
Based almost entirely on the conversion value of the timber stand currently in the existence upon the land. With little or no regard for the possibilities of continued production of forest crops.
Timberland market values
As forest areas are placed on a permanent timber-growing basis, timberland will be ____ valued, bought, and sold on the basis of their ____ rather than on the value of ____ as stumpage for conversion
increasingly, productive capacity, currently standing timber
The application of _____ based on land productivity is important for the establishment of ____ for sound forest investment.
sound valuation methods, market prices
One enduring resource of a permanent forest business
Land
Value of land for forest uses is derived from the _____ or _____ it can ____
Forest crops, other services, produce
4 controlling factors of forest land value
- Site quality
- Kind and intensity of management practiced including its costs
- Value of the product
- Effect of time interval involved as measured by the rate of interest employed
Inherent vigor of the site that measures the potential productivity of the forest.
Site quality
Site quality remains approximately _______ irrespective of the ____, _____, or ____ of the timber stand currently occupying the area, except when _____ have caused soil erosion, impoverishment, or development of undesirable soil texture or structure
constant, character, condition, quality, land-use
Influences the volume and quality of timber actually produced
Kind and Intensity of Management Practices
3 properties that can be controlled by silvicultural practices
- Degree of promptness of regeneration
- Species composition
- Stocking and growth
A given site may produce crops ranging from practically ___ to all of those approaching its ____
none, biological potential
The cost of _____ must be considered in relation to their _____.
Forest practices, Efficacy
Entails not only an estimate of what the products will bring in the market but also the cost of getting the products off the market
Value of the product
______ are often of controlling importance in determining the value of the timber crop as it stands in the forest
Accessibility factors
Determines what rate of interest should be employed in bringing the various costs and income elements, incurred and received at widely differing times to a common point in time
Effect of time interval involved
Growing timber takes time and usually a lot of time in relation to the ___ of most productive processes within the range of business experience
length
Growing of timber takes time and usually a lot of time in relation to the ___ of most productive processes within the range of business experience
length
Public owners have a relatively ___ time preference, indicating the use of a fairly ___ interest rate in considering public undertakings
low, low
Individual owners who must operate in full exposure to competitive business pressures, have a ____ time preference and can be expected to apply a rate at least as ___ as the ___ rate for alternative investments
Higher, high, going
In estimating forest land value for even-aged forest, direct estimate is to start with a ____, and visualize _____ of a forest stand upon it
Price of bare land, Establishment
A stand is grown to maturity, harvested, and the process started over again with no _____ to the series of income.
Termination date
A particular plot soil yields a crop at _____ intervals only
periodic
The various elements of cost and income pertinent to a particular plan of mgt must all be brought to a common point in time so that net income can be determined and capitalized. What is the common point in time?
Rotation age
Soil expectation value capitalizes the _____ value once every 30 years.
rotation age value
Significance of forest land values
Se estimation includes all the factors affecting land values
What are the 4 factors affecting land values?
- Site quality
- Cost of management
- Market and accessibility factors
- Time element
What are the practical implications of SE
- Se values are extremely sensitive in the rate of interest employed
- Se calculation focuses attention on the costs and return of building up of a forest on bare land
- Se values give a useful guide to the desirable length of the rotation
- The ground level of Se values in a forest area is of broad regional significance
If Se values are used as a measure of rotations, the nature of the capitalization process ____
capitalized value when the rate is ___ or vice versa
inflates, low
At reasonable rates, it gives a good indication of the most profitable rotation
Soil Expectation
Rotation of _____ Se values fall somewhere in between that indicated by the culmination of the ____ & by ____
highest, mean annual increment, max mean annual forest rent
Brings out clearly whether a forest once destroyed can be rebuilt on anything approaching a private business basis
Soil expectation
Value of timber stand is subject to ____ as the stand grows; in contrast to ___ since ____ does not grow
current change, land value, land
2 values that represent the maturity of timber
- Market value of the standing timber for immediate conversion,
- Whatever residual land value
3 General Approaches to Valuation of Timber Stand
- Current market value
- Cost value
- Income values
Estimation of future returns; estimating present net worth of all future incomes (less costs) that reasonably maybe expected
Income values
Is a matter of looking backward to the answer to what has been harvested.
Cost value
2 reasons why cost value is a natural approach
- It measures the degree of success or failure of the investment made
- It is an important basis in the event of damage when question of loss incurred is faced
Based on comparable timber stand. In places where forest production is done by private individuals, there are areas where market prices are fairly established
Current market value
Determination of cost and income values for even-aged stands following logically from those used in _____ except that the focus is on the ____, and either ___ or _____ land values are used
land value determination, stand, actual, assumed
Estimate for a stand of given age, the net present worth; at some assumed rate of interest of all past expenditures
Cost value
In cost value, income during the period be naturally _____
deducted
In cost value, ____ need to be included and logically it should be what the land ____
land value, actually cost
In calculating cost value only, the Se value ___ be determined separately since we have
excluded ___ in the determination of cost value.
cannot, future income
Se value determination requires that all ___ and _____ within the _____ be considered.
cost, revenue, rotation period
Income value is determined according to the same general procedure except that the viewpoint is ____ and only ____ and ___ are included instead of past cost and income.
forwarded, future incomes, expected costs
In income valuation, ____ land value at the end of the rotation is assumed
Arbitrary
The income value is a _____ value
Discounted
As an alternative, each item could have been ____ discounted instead of carrying them all to the end of the rotation.
individually
As an alternative, land value can logically be estimated ____ from the timber value, since such a value would ____ at the ___ of the rotation when the major crop is harvested.
separately, reappear, end
As an alternative, the bare land could presumably be ___ as such and becomes an element of ___ to consider in exactly the same way as an _____ value
sold, future value, expected future timber
Cost vs. Expectation Values
- Cost considers what has happened
2. Expectation value considers what is expected to happen
The one element common to both income and cost value.
Land value
Cost or income value for a timber stand can only be calculated when there is a _____ on the ground.
Timber stand
Cost value cannot be determined in an ____ since the stand is never developed directly on bare land.
uneven-aged stand
In uneven-aged stands, the land value never exists separately from timber value unless the forest is ____.
Destroyed
In an even-aged stand, the common forestry business situation is that a forest is organized for
_____ yield. Income in more or less ___ amounts are received each ____ and ___ are currently paid. The difference represents the yearly _____ or ____ as the case may be.
sustainable, equal, year, expenses, operating profit, loss
Timber in unprocessed form as it is found in the woods, most frequently, standing timber whether live or dead
Stumpage
The term “stumpage” can also be applied to timber ____ in connection with right-of-way clearing as long as it is not cut up into logs and other merchantable units.
wind-thrown timber
The raw material of the forest from which all woods are derived.
Stumpage
The standing merchantable timber
Stumpage
The value of the standing merchantable tree
Stumpage value
Based on the present value of all future net incomes of a resource
Income valuation
In income valuation, there is a need to ____ all of the _____ to the time when valuation is ____
discount, future incomes, done
Can be used to value existing timber stand grown under even-aged or uneven-aged management
Income valuation
In the income valuation of even-aged stands, the termination date of the stand is the ___ of the rotation
end
Income valuation can be done at ___ age of the rotation
any
Income valuation assume _____ at the end of rotation, considered as _____.
arbitrary land value, future income
Can be applied to even-aged stands, including fruit tree plantations
Cost valuation
Cost valuation _____ all costs incurred ___ time of valuation
compound, prior to
