The president of your company has persuaded you that you should be considering all future forest rotations when considering whether to use the land as a forest for convert timber into forest products. Now you want to find the rotation length T that maximizes the private net present value of all forest rotations:

NPV^p=D + _i=1 e^r(iT)[pQ(T)D]

=D+([pQ(T)D]/(e^rT1))

2.A. [1 point ]Write down the first-order condition associated with T and interpret the condition,in terms of marginal benefits and opportunity costs.

2.B. [1 point]Using Excel's Solver tool, determine the optimal rotation interval T using the parameter values p= 1,a= 15,b= 180,r= 0.05, and D= 1,000. Make sure you explain how you found your answer(a screen shot of your Excel spreadsheet is useful,but not necessary).Is T different from the rotation interval T^s from Problem 1? Why or why not?

2.C. [1 point]Using Excel, determine what happens to the optimal rotation interval and the net present value of the forest if the discount rate is instead lower than we actually thought (say,r= 0.01).How do you expect a lower discount rate to effect the amount of land devoted to forestry?