F 322

• elastic supply > 1

  
• inelastic supply < 1

  
• perfectly inelastic = 0

  
• unitary elastic = 1

  
• perfectly elastic = infinity

  
• periodic series: a series of payments that is made at regular intervals over a period of time
• The IRR is the rate of return where NPV = 0
• for a single forest rotation pick the age where MR = MC
• the faustmann model is used to find the optimal rotation age for an infinite series of rotations by maximizing the LEV
• for an infinite harvest scenario pick the age where MR = MC or where LEV is maximized
• when the price of a substitute increases, the demand for the other good increases
• when the price of a complement increases, the demand for the other good decreases
• a total supply or demand curve is a compilation of individual curves
• external factors that shift supply and demand curves: changes in population, income, or future prices
• Is this demand curve sensitive to a change in price?

  No

  
• Is this demand curve sensitive to a change in price?

  Yes

  
• Is this supply curve sensitive to a change in price?

  No

  
• net present value: used to discount future cash flows to their present values to find the profitability of a project
• if the NPV < 0 reject the project
• NPV = sum of discounted benefits - sum of discounted costs
• reject a project with a BCR < 1
• a project with a BCR of 1 will break even
• BCR is the ratio of total discounted benefits to total discounted costs
• to find the IRR, set the NPV formula equal to 0
• Accept projects that have an IRR higher than the cost of capital
• land expectation value is the value of a plot of land used for growing trees in perpetuity to find the return on investment at a given purchase price
• LEV is used to find the highest purchase price you can pay and still get a certain rate of return
• for a perpetuity scenario, marginal costs are timber and land rent
• primary manufacturers

  companies that buy raw materials and use them to make first order products like lumber or pulp
• a sawmill is a primary manufacturer
• secondary manufacturers

  companies that buy materials from primary manufacturers to make products like furniture, cardboard, or pallets
• economic contribution analysis


  estimates the importance of the existing forestry and forest product industry in a local economy
• economic impact analysis


  estimates the effects of new or expanding forestry and forest product industry on a state or regional economy
• discounting


  calculating the present value of a future cash flow
• compounding


  calculating the future value of a cash flow
• LEV is also the present value of the perpetual periodic series
• stumpage value


  the revenue from harvesting the forest stand
• stumpage value


  P(t) x G(t)
• yield from tree growth


  the standing timber volume
• yield from tree growth


  G(t)