The following three exercises require that you use the Excel file palc18.xls. (a) Calculate the optimal rotation

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The following three exercises require that you use the Excel file palc18.xls.

(a) Calculate the optimal rotation lengths for a single-rotation forest for the interest rates 1, 2, 4, 5 and 6%. These should match those shown in Table 18.5.

(b) Calculate the interest rate above which the PV of the forest becomes negative for any rotation length in a single rotation forest.

Do the same for an infinite-rotation forest.

(c) Identify what happens to the gap between the optimal rotation lengths in single- and infinite-rotation models as the interest rate becomes increasingly large (beginning from 0%). Explain the convergence that you should observe. What happens to the PV of the forest at this convergence?

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Natural Resource And Environmental Economics

ISBN: 9780321417534

4th Edition

Authors: Roger Perman, Yue Ma, Michael Common, David Maddison, James McGilvray

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