# Tree Value-Excel

Section 1 – Executive Summary

This report analyzes the case “Tree Values” to find an optimal way for Mr. Smith to manage his forestland and harvest the crop trees. The fundamental idea in this report is based on the concept of present value. A number of options are analyzed and the one with highest present value of pay off is considered.

Questions 9, 10, and 11 give Mr. Smith 3 options: * Option 1: Harvest all crop trees now and receive $8,160 * Option 2: Let the forest grow without thinning, then harvest all crop trees 60 years from now and receive $537,962.01 at harvesting, equivalent to $28,800.08 now * Option 3: Thin and manage the forest, then harvest all crop trees 50

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As shown in Table 3, at the 30th year, the price of the tree has the highest present value of $1.42. Therefore, (1) The optimal time to harvest the tree is 30 years from now (2) The tree would be sold for $6.16 at the 30th year.

|Years from |DBH(inches) |TreeGrade |BoardFeet/Tree |$MBF |Price/Tree($) |Present Value|

|now | | | | | |($) |

| 0 || 10 || 4 || 20 || 40.00 || 0.80 || 0.80 |

| 10 || 11 || 4 || 40 || 48.76 || 1.95 || 1.20 |

| 20 || 12 || 4 || 60 || 59.44 || 3.57 || 1.34 |

| 30 || 13 || 4 || 85 || 72.45 || 6.16 || 1.42 |

| 40 || 14 || 4 || 110 || 88.32 || 9.72 || 1.38 |

| 50 || 15 || 4 || 145 || 107.66 || 15.61 || 1.36 |

| 60 || 16 || 4 || 180 || 131.24 || 23.62 || 1.26 |

Question 4

This question is