This question is a little difficult to understand. It appears to be the beginning of an essay answer regarded a case study of Bunyan Lumber LLC and when they should harvest their timber. A summary of this answer, that is available at http://www.brainmass.com/homework-help/business/finance/204614) can be found as follows.
The company Bunyan Lumber LLC harvest timber and then deliver logs to timber mills to be sold. The umber that is sold by Bunyan Lumber LLC is sold for its 'pond value'. This is the amount that a mill is willing to pay for the log to be delivered directly. The price that is quoted to deliver the logs to a mill is agree in dollars per thousands of board feet (MBF), this price can also vary depending on the grade and condition of the logs. Bunyan Lumber LLC source lumber from their own forest that they planted over 20 years ago. This forest is made entirely of Douglas fir trees and the price per MBF varies between grades as follows. Grade one timber sells for $1,050 per MBF, grade two timber sells for $925 per MBF and grade three timber sells for $770 per MBF. The owner of the company believes that the pond value of this lumber will increase to coincide with the inflation rate. By thinning the forest, the company believes they can gain an additional cash flow of $1,000 per acre.
The biggest problem Bunyan Lumber LLC has to deal with is the decision about when to log the forest. Logging the forest will require the company to immediately replant saplings for future harvests but the longer a forest is allowed to grow, the largest the harvest becomes per acre and the higher the grade of timber. Harvesting the timber leads to the forest being clear cut. This methods allows the replanted trees to grow at a much faster rate. Reforesting the land involves a large additional cost and the amount of timber that can be produced will dramatically decrease while the trees continue to grow. The company have also agreed to givemoney to a conservation fund when they do the big harvest. With all of the costs involved in the process, the company has to decide between short term benefits and a steady income or long term benefits with an immediate big loss.
The company Bunyan Lumber LLC harvest timber and then deliver logs to timber mills to be sold. The umber that is sold by Bunyan Lumber LLC is sold for its 'pond value'. This is the amount that a mill is willing to pay for the log to be delivered directly. The price that is quoted to deliver the logs to a mill is agree in dollars per thousands of board feet (MBF), this price can also vary depending on the grade and condition of the logs. Bunyan Lumber LLC source lumber from their own forest that they planted over 20 years ago. This forest is made entirely of Douglas fir trees and the price per MBF varies between grades as follows. Grade one timber sells for $1,050 per MBF, grade two timber sells for $925 per MBF and grade three timber sells for $770 per MBF. The owner of the company believes that the pond value of this lumber will increase to coincide with the inflation rate. By thinning the forest, the company believes they can gain an additional cash flow of $1,000 per acre.
The biggest problem Bunyan Lumber LLC has to deal with is the decision about when to log the forest. Logging the forest will require the company to immediately replant saplings for future harvests but the longer a forest is allowed to grow, the largest the harvest becomes per acre and the higher the grade of timber. Harvesting the timber leads to the forest being clear cut. This methods allows the replanted trees to grow at a much faster rate. Reforesting the land involves a large additional cost and the amount of timber that can be produced will dramatically decrease while the trees continue to grow. The company have also agreed to givemoney to a conservation fund when they do the big harvest. With all of the costs involved in the process, the company has to decide between short term benefits and a steady income or long term benefits with an immediate big loss.
