Bunyan Lumber

Complete Chapter 9 Closing Case above and submit answers to your instructor.

Instructions from instructor:

To arrive at your answer the instructor said, “You will need to consider the real or nominal cash flows for the organization. Inflation as well as tax implications will also need to be taken into consideration with your analysis. You will want to determine which of the options yeilds the highest NPV. Be sure to include calculations to support your conclusions. It is optimal that you show your work in an excel spreadsheet. If necessary, you may submit a MSWord document as well as the Excel document.

Bunyan Lumber, LLC

Bunyan Lumber, LLC, harvests timber and delivers logs to timber mills for sale. The company was founded 70 years ago by Pete Bunyan. The current CEO is Paula Bunyan, the granddaughter of the founder. The company is currently evaluating a 7,500-acre forest is owns in Oregon. Paula has asked Steven Boles, the company's finance officer, to evaluate the project. Paula's concern is when the company should harvest the timber.

Lumber is sold by the company for its “pond value.” Pond value is the amount a mill will pay for a log delivered to the mill location. The price paid for logs delivered to a mill is quoted in dollars per thousands of board feet (MBF), and the price depends on the grade of the logs. The forest Bunyan Lumber is evaluating was planted by the company 20 years ago and is made up entirely of Douglas fir trees. The table below shows the current price per MBF for the three grades of timber the company fels will come from the stand:

|Timber Grade |Price Per MBF |

|1P |$1,150.00 |

|2P |990...