In time value of money, we use five categories of information, viz., present value, future value, discount rate, number of compounding periods and interim payments. In particular, the choice of the right discount rates is a challenge as it represents a combination of risk factors, such as business; inflation; environmental; social and political risks. Your company is planning an investment project in commercial forestry.

The NPV maximizing rule is to cut a tree when its growth rate equals the discount rate. If we were to apply the time value of money the most appropriate time to cut a tree for lumber is when the tree is growing at its fastest rate, when the tree is young. As the tree ages its growth slows. What are the limitations of this decision rule? Comment on the limitations of using the discount rate as a decision input considering the recent floods and forestry practices in British Columbia?