1. A logging company is considering equipment that costs $800,000 and is projected to increase profits (after tax) by $100,000 per year for the next 10 years. The equipment will be sold for $80,000 at the end of year 10. Your Minimum Acceptable Rate of Return is 5%.

What is the net present value of the investment?

2. The stand has 1,000 board feet (1 MBF) per hectare. The average stumpage price is $100/MBF, or $100 per hectare total value. The Annual volume growth is 0.1 MBF/year. The rate of real price increase 3%/year.

Should the landowner harvest now or wait 10 years?