Bunyan Llc Case

1t\

BUNYAN LUMBER, LLC

!.&*

*r3

€

F?E

*J

timber mills for sale' The company !\a'l Bunyan Lumber, LLC, harvests timber and delivers logs to Paula Bunyan, the granddaughter founded 70 years ago by Pete Bunyan. The current cEO is forest it owns in 0regon' Paula has asir*J founder. The company is currently evaluating a 7,500-acre the proiect' Paula's concern is when:r* steve Boles, the company's finance officer, to evaluate company should harvest the timber. "pond value." Pond value is the amount a mill will paY ":r' Lumber is sold by the company for its price paid for logs delivered to a mill is quoted in doliars a log delivered to the mill location. The The forest Bu;:r*r' and lhe price depends on the grade of the logs' thousands of board feet {MBF), ir 20 years ago and is made up entirely of Douglas Lumber is evaluating was planted by the company timber the compail'rc price per MBF for the three grades oi trees. The table below shows the current stand: feels will come from the

of:*

l*'

1P

$1,150 990 840

2P 3P

Thecompanyisplanstevebelievesthatthepondvalueof lumberwill increaseattheinflationrate of $1'200 per acre from todaY, and it expects to realize a positive cash {low ning to thin the forest growth rate of the remaining trees' and it is always thinning. The thinning is done to increase the

log the forest' When the company logs the The major decision the comp-any faces is when to will allow for a future harvest' The longer the forforest, it will immediatery reptani saplings, which per acre. Additionally, an older forest has a est is allowed t0 gr0w. the larger the harvest becomes table with the expected harvest per acre in higher grade of timber. Steve h-as compiled the following timber grade' thousands of board feet, along with the breakdown ofthe

done 20 years following a planting'

Lt)

6 8.2 9.4 10.5

10o/o

25 30 35

13 11

1g

40.k 46 48 51

50%

41

35 30

it cuts due to defects and breakage' The...