Chapter 7

Bunyan Lumber, LLC

Input area:

Total acreage 5,000

Years since original planting 20
1P pond value $ 660
2P pond value $ 630
3P pond value $ 620
Cash flow/acre from thinning $ 1,000
Years from today for harvest Harvest (MBF)
to begin per acre 1P 2P 3P
20 14.1 16% 36% 48%

Defect rate 5%
Tractor cost (MBF) $ 140
Road (MBF) $ 50
Sale preparation and
and administrative (MBF) $ 18

Excavator piling/acre $ 150

Broadcast burning/acre $ 300
Site preparation/acre $ 145
Planting costs/acre $ 225

Nominal required return 10.00%

Inflation rate 3.70%
Tax rate 35%

Conservation fund $ 250,000

Conservation fund growth 3.20%

Output area:

Real required return 6.08%

Cash flow from thinning $ 5,000,000

Harvest in 20 years

Revenue $ 42,194,250
Tractor cost 9,870,000
Road 3,525,000
Sale preparation & admin 1,269,000
Excavator piling 750,000
Broadcast burning 1,500,000
Site preparation 725,000
Planting costs 1,125,000
EBIT $ 23,430,250
Taxes 8,200,588
Net income (OCF) $ 15,229,663

PV of first harvest $ 4,681,788

Next thinning will occur in 40 years, and will reoccur at this same interval.
The effective real interest rate for this period is 958.17%
The real rate in the conservation fund is 6.59%
The effective real interest rate for the
conservation fund for this period is 1183.87%
Aftertax cost of convservation $ (162,500.00)
Value of conservation at harvest $ (176,226.22)

PV of future thinnings $ 521,825.80

PV of future harvests $ 488,615.51
PV of conservation fund $ (49,182.52)

Total NPV $ 5,643,046.36

Real required return 6.08% 6.08% 6.08% 6.08%

Cash flow from thinning $ 5,000,000.00 $ 5,000,000.00 $ 5,000,000.00 $ 5,000,000.00

Harvest in (years) 20 25 30 35

Revenue $ 42,194,250.00 $ 49,232,800.00 $ 52,024,992.50 $ 54,516,747.50

Tractor cost $ 9,870,000.00 $ 11,480,000.00 $ 12,110,000.00 $ 12,670,000.00
Road $ 3,525,000.00 $ 4,100,000.00 $ 4,325,000.00 $ 4,525,000.00
Sale preparation & admin $ 1,269,000.00 $ 1,476,000.00 $ 1,557,000.00 $ 1,629,000.00
Excavator piling $ 750,000.00 $ 750,000.00 $ 750,000.00 $ 750,000.00
Broadcast burning $ 1,500,000.00 $ 1,500,000.00 $ 1,500,000.00 $ 1,500,000.00
Site preparation $ 725,000.00 $ 725,000.00 $ 725,000.00 $ 725,000.00
Planting costs $ 1,125,000.00 $ 1,125,000.00 $ 1,125,000.00 $ 1,125,000.00
EBIT $ 23,430,250.00 $ 28,076,800.00 $ 29,932,992.50 $ 31,592,747.50
Taxes $ 8,200,587.50 $ 9,826,880.00 $ 10,476,547.38 $ 11,057,461.63
Net income (OCF) $ 15,229,662.50 $ 18,249,920.00 $ 19,456,445.13 $ 20,535,285.88

PV of first harvest $ 4,681,787.56 $ 4,177,464.29 $ 3,316,237.53 $ 2,606,233.04

Next thinning will occur in 40 45 50 55

The effective real interest rate 958.17% 1321.11% 1808.52% 2463.10%
The real rate in the conservati 6.59% 6.59% 6.59% 6.59%
The effective real interest rate for the
conservation fund for this pe 1183.87% 1666.38% 2330.24% 3243.60%

Aftertax cost of convservation $ (162,500.00) $ (162,500.00) $ (162,500.00) $ (162,500.00)

Value of conservation at harve $ (176,226.22) $ (172,251.67) $ (169,473.53) $ (167,509.87)

PV of future thinnings $ 521,825.80 $ 378,470.46 $ 276,469.34 $ 202,995.97

PV of future harvests $ 488,615.51 $ 316,209.37 $ 183,367.60 $ 105,810.96
PV of conservation fund $ (49,182.52) $ (34,941.27) $ (24,986.89) $ (17,950.88)

Total NPV $ 5,643,046.36 $ 4,837,202.85 $ 3,751,087.59 $ 2,897,089.08

Chapter 7
Bunyan Lumber, LLC

Input area:

Total acreage 5,000

Years since original planting 20
1P pond value $ 660
2P pond value $ 630
3P pond value $ 620
Cash flow/acre from thinning $ 1,000
Years from today for harvest Harvest (MBF)
to begin per acre 1P
25 16.4 20%

Defect rate
Tractor cost (MBF)
Road (MBF)
Sale preparation and
and administrative (MBF)
5%
$ 140
$ 50
$ 18

Excavator piling/acre $ 150

Broadcast burning/acre $ 300
Site preparation/acre $ 145
Planting costs/acre $ 225

Nominal required return 10.00%

Inflation rate 3.70%
Tax rate 35%

Conservation fund $ 250,000

Conservation fund growth 3.20%

Output area:

Real required return 6.08%

Cash flow from thinning $ 5,000,000

Harvest in 25 years

Revenue $ 49,232,800
Tractor cost 11,480,000
Road 4,100,000
Sale preparation & admin 1,476,000
Excavator piling 750,000
Broadcast burning 1,500,000
Site preparation 725,000
Planting costs 1,125,000
EBIT $ 28,076,800
Taxes 9,826,880
Net income (OCF) $ 18,249,920

PV of first harvest $ 4,177,464

Next thinning will occur in 45 years, and will reoccur at this sa

The effective real interest rate for this period is 1321.11%
The real rate in the conservation fund is 6.59%
The effective real interest rate for the
conservation fund for this period is 1666.38%

Aftertax cost of convservation $ (162,500.00)

Value of conservation at harvest $ (172,251.67)

PV of future thinnings $ 378,470.46

PV of future harvests $ 316,209.37
PV of conservation fund $ (34,941.27)

Total NPV $ 4,837,202.85

 2P 3P
40% 40%
nd will reoccur at this same interval.
Chapter 7
Bunyan Lumber, LLC

Input area:

Total acreage 5,000

Years since original planting 20
1P pond value $ 660
2P pond value $ 630
3P pond value $ 620
Cash flow/acre from thinning $ 1,000
Years from today for harvest Harvest (MBF)
to begin per acre 1P
30 17.3 22%

Defect rate
Tractor cost (MBF)
Road (MBF)
Sale preparation and
and administrative (MBF)
5%
$ 140
$ 50
$ 18

Excavator piling/acre $ 150

Broadcast burning/acre $ 300
Site preparation/acre $ 145
Planting costs/acre $ 225

Nominal required return 10.00%

Inflation rate 3.70%
Tax rate 35%

Conservation fund $ 250,000

Conservation fund growth 3.20%

Output area:

Real required return 6.08%

Cash flow from thinning $ 5,000,000

Harvest in 30 years

Revenue $ 52,024,993
Tractor cost 12,110,000
Road 4,325,000
Sale preparation & admin 1,557,000
Excavator piling 750,000
Broadcast burning 1,500,000
Site preparation 725,000
Planting costs 1,125,000
EBIT $ 29,932,993
Taxes 10,476,547
Net income (OCF) $ 19,456,445

PV of first harvest $ 3,316,238

Next thinning will occur in 50 years, and will reoccur at this sa

The effective real interest rate for this period is 1808.52%
The real rate in the conservation fund is 6.59%
The effective real interest rate for the
conservation fund for this period is 2330.24%

Aftertax cost of convservation $ (162,500.00)

Value of conservation at harvest $ (169,473.53)

PV of future thinnings $ 276,469.34

PV of future harvests $ 183,367.60
PV of conservation fund $ (24,986.89)

Total NPV $ 3,751,087.59

 2P 3P
43% 35%
nd will reoccur at this same interval.
Chapter 7
Bunyan Lumber, LLC

Input area:

Total acreage 5,000

Years since original planting 20
1P pond value $ 660
2P pond value $ 630
3P pond value $ 620
Cash flow/acre from thinning $ 1,000
Years from today for harvest Harvest (MBF)
to begin per acre 1P
35 18.1 24%

Defect rate
Tractor cost (MBF)
Road (MBF)
Sale preparation and
and administrative (MBF)
5%
$ 140
$ 50
$ 18

Excavator piling/acre $ 150

Broadcast burning/acre $ 300
Site preparation/acre $ 145
Planting costs/acre $ 225

Nominal required return 10.00%

Inflation rate 3.70%
Tax rate 35%

Conservation fund $ 250,000

Conservation fund growth 3.20%

Output area:

Real required return 6.08%

Cash flow from thinning $ 5,000,000

Harvest in 35 years

Revenue $ 54,516,748
Tractor cost 12,670,000
Road 4,525,000
Sale preparation & admin 1,629,000
Excavator piling 750,000
Broadcast burning 1,500,000
Site preparation 725,000
Planting costs 1,125,000
EBIT $ 31,592,748
Taxes 11,057,462
Net income (OCF) $ 20,535,286

PV of first harvest $ 2,606,233

Next thinning will occur in 55 years, and will reoccur at this sa

The effective real interest rate for this period is 2463.10%
The real rate in the conservation fund is 6.59%
The effective real interest rate for the
conservation fund for this period is 3243.60%

Aftertax cost of convservation $ (162,500.00)

Value of conservation at harvest $ (167,509.87)

PV of future thinnings $ 202,995.97

PV of future harvests $ 105,810.96
PV of conservation fund $ (17,950.88)

Total NPV $ 2,897,089.08

 2P 3P
45% 31%
nd will reoccur at this same interval.