Undertake some silvicultural activities to increase yield

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Reference no: EM131186359

You recently purchased some immature timberland that is forty years from being harvested. You expect to get $438/MBF when you harvest the timber. Prior to harvesting, you have two objectives. You hope to come up with a plan to generate some annual revenue to help pay taxes on the land and you hope to undertake some silvicultural activities to increase your yield. Your neighbor, an avid mushroom and truffle hunter, is willing to sign a formal lease $28/acre/yr to hunt and forage non-timber forest products until you harvest. Your brother-in-law hears about this plan and says he and his buddies would be willing to pay $21/acre/yr to hunt until you harvest but they would need you to spend $70/acre immediately on some feed plots and wildlife openings. They will host a BBQ for you at the start of each hunting season as well. The two of them don't get along and will not share the property. You are also looking at a fertilizer treatment that will add 34% to your expected yield (around 6.6 MBF). The fertilizer treatment will cost $32/acre. Your neighbor harvests organic natural truffles and mushrooms only and will not harvest on the fertilized land. Your neighbor sells truffles for $50/lb and collects around 4 lbs/acre on a good year. You have traditionally made 7% in equity markets.

A. Who do you give the lease to and why?

B. How much would the other party have to pay per acre per year in order to change your decision?

Reference no: EM131186359

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