3. Two illustrative examples
Example 1
A forest owner anticipates earning the following net harvest revenue from the forest that she planted in 2006. What is the present value (sum) of the revenues at 4 % discount rate?1
| Year
|
Revenue (€/ha) | Discounted (€/ha) |
| 2036
|
800
|
247
|
| 2051
|
3000
|
514
|
| 2066
|
13000
|
1236
|
| Sum
|
|
1996 (present value, 4%)
|
Example 2
How many euros are required from a final felling at year 60 to earn a 3 % average annual rate of return for 800-euros planting investment at year 0?2
1. The answer to Example #1 is 1,996 €/ha.
2. The answer to Example #2 is 4,713 euros after using the compounding equation.
2. The answer to Example #2 is 4,713 euros after using the compounding equation.