Tree Values

Project Assignment

AFM

Topic: Case Study:

(Tree Value)

Submitted To, Sir M.Akbar Khan

Submitted By, Waseem Ali 01-120091-082 MBA 3 ‘B’

Dated: 27-08-2010

Bahria University Islamabad

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Tree Values

Introduction:

Mr. Smith was a person who owns a forest land which was inherited by his father. He was only interested for his land to be is his asset, beside that he checked on prices of land in that area. The value of his land was increased by some of the trees that were high quality timber. Ms Bennett was a specialist who helps him in suggesting and to make decision whether to cut the trees presently of not. Logger was interested in timber and proposed Mr. Smith to cutting the trees that were 12” DBH. As timber was a high volume business the prices for standing timber were in dollar per thousand MBF. Value of trees depends on (i) Usable timber (ii) trees Quality / grade. The trees which were above 12” DBH and 60 Board feet were consider good and value worth, but below 12” the wood was not of commercial value. Trees growing rate in the New England was: Good quality hardwood grows 2” in diameter in 10 years . Inferior quality grows ½” in diameter in 10 years. Further tree value also depended on Increase in timber prices i.e. Price increased over last 20 years steadily and likely to continue. Currently increasing 1-3% above rate of inflation. There were 300 trees per acre on property. Ms. Bennett’s Estimates: In 40 acres of land there were about 60 crops tree per acres. Which were evenly divided into 12” and 14”. There were mostly grade 4 trees according to size & conditions. Ms. Bennett’s Suggestions: (i) He should consider thinning cutting about half of the 12” and 14” trees. This will allow to grow 1” in diameter in 5 years. Situations for Cutting Trees: 1- Cutting the trees that were 12” DBH 2- Leave the unwanted crops to grow in future and cut the less desired trees.

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Data for valuing tree with respect to forest industry: 1234CAPM NPV...