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Read Table 11.1 in the textbook and answer the following questions. (25 points) (1) Find out the age when value of timber is the highest,
Read Table 11.1 in the textbook and answer the following questions. (25 points) (1) Find out the age when value of timber is the highest, the optimal age to harvest, with interest rate r =0, 0.01, 0.02, 0.04? (4 points) (2) Explain your findings about the relationship of age with highest timber value and age to harvest. (5 points) (3) Based on the assumptions given, list the three conclusions from Table 11.1. (6 points) (4) What happens to optimal age to harvest when government impose a tax and why. (5 points) (5) If we extend the basic model to infinite-planting model that recognizes the interdependencies between periods. All else constant, how does the optimal rotation time change compared to the basic model and why? (5 points)
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