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T.R. Farmer paid $200.00 per acre for 500 acres of woodland. He figures his interest on investment as follows:
Initial investment $200.00 x 500 acres (Land and Timber) =         $100,000
Annual Income
Average annual increase in value expected 8% on market value
of $100,000 =                                                        +8,000

Production of 100 board feet sawtimber per acre per year worth 
$30.00 per Mbf stumpage =                                            +1,500
Annual rental of hunting rights to Green County Sportman's Club =    +1,000
Annual recreational and aesthetic value to the Farmer family =       +  300
Annual Expenses
Property Taxes =                                                     -  700
T. R. Farmer's supervisory time 80 hours per year x $4 per hour =    -  320
Annual TSI of 25 acres at $40 per acre less $30 FIP Cost-Share =     -  250
    Annual net worth increase or 9.5% on his original investment =   $9,530
  1. If T. R. Farmer must pay his local banker 9.5% on money borrowed to buy the tract, then he will break even.
  2. If T. R. Farmer has a savings account of $100,000 on which he was drawing 6% interest from his local savings and loan, then he obtains an extra 3.5% on his savings by investing it in woodland.
  3. If T. R. Farmer feels he must obtain 12% interest before the investment will be worthwhile, then he cannot afford to pay more than $74,417 for the 500 acres and the $100,000 price tag makes it too expensive for him.
                        $9,530.00/.12 = $74,417

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Last revised September 3, 1995.

Please send comments to: Duane Bristow (72711.1414@compuserve.com)