PINE TIMBER INVESTMENT -- DISCOUNTED CASH FLOW ANALYSIS

Assumptions

1.   Purchase clearcut land at $500/acre -- all land is productive
2.   Site prepare and plant @ $180/acre
3.   Thin years 14, 24, and harvest year 35 -
           - Management is for Sawtimber production
4.   Sell land year 35
5.   Timber prices today
     PPW (Pine Pulpwood)        $8/cord
     SST (Small Sawtimber)      $220/MBF (thousand board feet)
     LST (Large Sawtimber)      $300/MBF
6.   Prices Increase Annually at 3%
7.   Recreation Income (Hunting) at $7/acre and increases annually at 3%
8.   Management fee at $3/acre and increases annually at 3%
9.   Taxes at 20%
10.  Discount rate of 8%
11.  Volumes cut
        Year 14         8 cords/acre
        Year 24         2.5 MBF and 6.4 cords/acre
        Year 35         11 MBF and 4 cords/acre



Using the above assumptions, 
     the IRR (internal rate of return) for the investment is 9.01%

            Test 1      Decrease PPW prices to $2/cord
                        IRR is 8.85%

            Test 2      Increase PPW prices to $20/cord
                        IRR is 9.32%

            Test 3      Delay cut for 2 years
                        IRR is 8.73%

            Test 4      Delay cut for 3 years
                        IRR is 8.42%