Problem 1: Loblolly Pine Plantation (Known Rotation Range) A forester is considering planting loblolly pine on a recently acquired site. They expect the optimal rotation to be between 20 and 40 years. The following information is available: • • • • Land cost: $500/acre (one-time cost at year 0) Establishment cost: $250/acre at year 0 Annual property taxes: $3/acre/year Timber price: $100/acre/year (assumed constant throughout the rotation) Discount rate: 7% Calculate the LEV for each year between 20 and 40 years and identify the optimal rotation age that maximizes LEV.
Problem 1: Loblolly Pine Plantation (Known Rotation Range) A forester is considering planting loblolly pine on a recently acquired site. They expect the optimal rotation to be between 20 and 40 years. The following information is available: • • • • Land cost: $500/acre (one-time cost at year 0) Establishment cost: $250/acre at year 0 Annual property taxes: $3/acre/year Timber price: $100/acre/year (assumed constant throughout the rotation) Discount rate: 7% Calculate the LEV for each year between 20 and 40 years and identify the optimal rotation age that maximizes LEV.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Problem 1: Loblolly Pine Plantation (Known Rotation Range)
A forester is considering planting loblolly pine on a recently acquired site. They expect the
optimal rotation to be between 20 and 40 years. The following information is available:
•
•
•
•
Land cost: $500/acre (one-time cost at year 0)
Establishment cost: $250/acre at year 0
Annual property taxes: $3/acre/year
Timber price: $100/acre/year (assumed constant throughout the rotation)
Discount rate: 7%
Calculate the LEV for each year between 20 and 40 years and identify the optimal
rotation age that maximizes LEV.
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