1. As lumberjacks cut down old growth forests in the Pacific Northwest, spotted owl habitat disappears. One tract of forest in Oregon with particularly good owl habitat has recently been discovered. The table below shows future values of two possible uses for the tract over the next 20 years, preservation versus logging using sustainable forestry techniques. The numbers indicate increasing conservation values over time, while logging values remain constant. All values are given in net benefit terms (i.e., total benefits minus total costs) a. (8 points). Using a 6% discount rate, what is the present value of each use summed up over the 20-year time horizon? Which is the more economically efficient use of this tract of forest? (Hint: use the Excel template in Moodle to do your calculations.) b. (6 points)-Redo your analysis using a 3% discount rate, which forest use is the more economically efficient now? What does this tell us about the importance of selecting an appropriate discount rate?. c. (4 points). Using a 6% discount rate, what is the present value of $190,000 logging benefit in year 50? In year 100? What does this tell us about the economic significance of values held by the next generation Discount Rate: 6.0% Het Benefits Het Benefits Logging $190, 000 $190, 000 $190, 000 $190, 000 $190, 000 $190, 000 $190, 000 $190, 000 $190, 000 $190, 000 $190, 000 $190, 000 $190, 000 $190, 000 $190, 000 $190, 000 $190, 000 $190, 000 $190, 000 PVHB Year Preservation Preservation PVHB Logging $110, 000 $120, 000 $130, 000 $140, 000 $150, 000 $160, 000 $170, 000 $180, 000 $190, 000 $200, 000 $210, 000 $220, 000 $230, 000 $240, 000 $250, 000 $260, 000 $270, 000 $280, 000 $290, 000 10 12 13 15 16 17 18 19 20 50 100 $190, 000 $190, 000