Question

You purchased forest for as an investment at a cost of $1,250 per acre as an investment to supplement your retirement income. After three years, you prune your trees at a cost of $100 per acre. You estimate your income from selective timber harvesting will be $3,000 per acre beginning 20 years after the trees are planted and occurring every 10 years thereafter in perpetuity. You have annual property taxes of $4 per acre starting next year. What is the present value of this investment, assuming a 6 percent discount rate? NEED FORMULA AND FULL SOLUTION, NOT EXCEL TABLE PLEASE!

*edit. Pruning is just once after 3 years.

Answer 1

First cost		$   -1,250.00	per acre
PV of cost of pruning = -100/1.06^3 =		$         -83.96	per acre
PV of income from selective harvesting:
Discounted value at t20 = 3000*0.06/((1.06^10-1)*0.06)) =	$     3,793.40		per acre
PV of 1359.23 = 3793.40/1.06^20 =		$     1,182.80	per acre
PV of annual property taxes =-4/0.06 =		$         -66.67	per acre
PV of the investment		$       -217.83	per acre