Chapter 7 Mini Case

BUNYAN LUMBER LLC

Input Area

Total acreage $ 5,000

Years since original planting $ 20
1P pond value $ 620
2P pond value $ 605
3P pond value $ 595
Cash flow/acre from thinning $ 1,000

Years from today for harvest to begin Harvest (MBF) per

Acre 1P
20 14.1 16%

Defect rate 5%
Tractor cost (MBF) $ 140
Road (MBF) $ 50
Sale preparation and administrative (MBF) $ 18

Excavator piling/acre $ 150

Broadcast burning/acre $ 300
Site preparation/acre $ 145
Planting costs/acre $ 225

Nominal required return 10.0%

Inflation rate 3.7%
Tax rate 35.0%

Conservation fund $ 250,000

Conservation fund growth 3.2%

Output Area

Real required return 6.08%

Cash flow from thinning $ 5,000,000

Harvest in 20 years
Revenue $ 40,359,135
Tractor cost $ 9,870,000
Road $ 3,525,000
Sale preparation & admin $ 1,269,000
Excavator piling $ 750,000
Broadcast burning $ 1,500,000
Site preparation $ 725,000
Planting costs $ 1,125,000
EBIT $ 21,595,135
Taxes $ 7,558,297
Net income (OCF) $ 14,036,838

PV of first harvest $ 4,315,098

Next thinning will occur in 40 years, and will reoccu

The effective real interest rate for this period is 958.2%
The real rate in the conservation fund is 6.59%
The effective real interest rate for the conservation
fund for this period is 1183.9%

Aftertax cost of convservation $ (162,500.00)

Value of conservation at harvest $ (176,226.22)

PV of future thinnings $ 521,825.80

PV of future harvests $ 450,345.94
PV of conservation fund $ (49,182.52)

Total NPV $ 5,238,087.63

 2P 3P
36% 48%
years, and will reoccur at this same interval.
Chapter 7 Mini Case
BUNYAN LUMBER LLC

Input Area

Total acreage $ 5,000

Years since original planting $ 20
1P pond value $ 620
2P pond value $ 605
3P pond value $ 595
Cash flow/acre from thinning $ 1,000

Years from today for harvest to begin Harvest (MBF) per

Acre 1P
25 16.4 20%

Defect rate 5%
Tractor cost (MBF) $ 140
Road (MBF) $ 50
Sale preparation and administrative (MBF) $ 18

Excavator piling/acre $ 150

Broadcast burning/acre $ 300
Site preparation/acre $ 145
Planting costs/acre $ 225

Nominal required return 10.0%

Inflation rate 3.7%
Tax rate 35.0%

Conservation fund $ 250,000

Conservation fund growth 3.2%

Output Area

Real required return 6.08%

Cash flow from thinning $ 5,000,000

Harvest in 25 years
Revenue $ 47,051,600
Tractor cost $ 11,480,000
Road $ 4,100,000
Sale preparation & admin $ 1,476,000
Excavator piling $ 750,000
Broadcast burning $ 1,500,000
Site preparation $ 725,000
Planting costs $ 1,125,000
EBIT $ 25,895,600
Taxes $ 9,063,460
Net income (OCF) $ 16,832,140

PV of first harvest $ 3,852,930

Next thinning will occur in 45 years, and will reoccur

The effective real interest rate for this period is 1321.1%
The real rate in the conservation fund is 6.59%
The effective real interest rate for the conservation
fund for this period is 1666.4%

Aftertax cost of convservation $ (162,500.00)

Value of conservation at harvest $ (172,251.67)

PV of future thinnings $ 378,470.46

PV of future harvests $ 291,644.04
PV of conservation fund $ (34,941.27)

Total NPV $ 4,488,103.20

 2P 3P
40% 40%
years, and will reoccur at this same interval.
Chapter 7 Mini Case
BUNYAN LUMBER LLC

Input Area

Total acreage $ 5,000.00

Years since original planting $ 20.00
1P pond value $ 620.00
2P pond value $ 605.00
3P pond value $ 595.00
Cash flow/acre from thinning $ 1,000.00

Years from today for harvest to begin Harvest (MBF) per

Acre 1P
30 17.3 22%

Defect rate 5%
Tractor cost (MBF) $ 140.00
Road (MBF) $ 50.00
Sale preparation and administrative (MBF) $ 18.00

Excavator piling/acre $ 150.00

Broadcast burning/acre $ 300.00
Site preparation/acre $ 145.00
Planting costs/acre $ 225.00

Nominal required return 10.0%

Inflation rate 3.7%
Tax rate 35.0%

Conservation fund $ 250,000

Conservation fund growth 3.2%

Output Area

Real required return 6.08%

Cash flow from thinning $ 5,000,000

Harvest in 30 years
Revenue $ 49,699,440
Tractor cost $ 12,110,000
Road $ 4,325,000
Sale preparation & admin $ 1,557,000
Excavator piling $ 750,000
Broadcast burning $ 1,500,000
Site preparation $ 725,000
Planting costs $ 1,125,000
EBIT $ 27,607,440
Taxes $ 9,662,604
Net income (OCF) $ 17,944,836

PV of first harvest $ 3,058,593

Next thinning will occur in 50 years, and will reoccur

The effective real interest rate for this period is 1808.5%
The real rate in the conservation fund is 6.59%
The effective real interest rate for the conservation
fund for this period is 2330.2%

Aftertax cost of convservation $ (162,500.00)

Value of conservation at harvest $ (169,473.53)

PV of future thinnings $ 276,469.34

PV of future harvests $ 169,121.42
PV of conservation fund $ (24,986.89)

Total NPV $ 3,479,196.45

 2P 3P
43% 35%
years, and will reoccur at this same interval.
Chapter 7 Mini Case
BUNYAN LUMBER LLC

Input Area

Total acreage $ 5,000

Years since original planting $ 20
1P pond value $ 620
2P pond value $ 605
3P pond value $ 595
Cash flow/acre from thinning $ 1,000

Years from today for harvest to begin Harvest (MBF) per

Acre
35 18.1

Defect rate 5%
Tractor cost (MBF) $ 140
Road (MBF) $ 50
Sale preparation and administrative (MBF) $ 18

Excavator piling/acre $ 150

Broadcast burning/acre $ 300
Site preparation/acre $ 145
Planting costs/acre $ 225

Nominal required return 10.0%

Inflation rate 3.7%
Tax rate 35.0%

Conservation fund $ 250,000

Conservation fund growth 3.2%

Output Area

Real required return 6.08%

Cash flow from thinning $ 5,000,000

Harvest in 35
Revenue $ 52,057,863
Tractor cost $ 12,670,000
Road $ 4,525,000
Sale preparation & admin $ 1,629,000
Excavator piling $ 750,000
Broadcast burning $ 1,500,000
Site preparation $ 725,000
Planting costs $ 1,125,000
EBIT $ 29,133,863
Taxes $ 10,196,852
Net income (OCF) $ 18,937,011

PV of first harvest $ 2,403,388

Next thinning will occur in 55

The effective real interest rate for this period is 2463.1%
The real rate in the conservation fund is 6.59%
The effective real interest rate for the conservation
fund for this period is 3243.6%

Aftertax cost of convservation $ (162,500.00)

Value of conservation at harvest $ (167,509.87)

PV of future thinnings $ 202,995.97

PV of future harvests $ 97,575.62
PV of conservation fund $ (17,950.88)

Total NPV $ 2,686,008.85

 1P 2P 3P
24% 45% 31%

years
years, and will reoccur at this same interval.