The volume growth of a forest stand (in cubic metres per hectare) is described by $V(t)=200\bigl(1-e^{-0.05t}\bigr)$, where $t$ is the age in years. The stand is currently 30 years old. The timber price is ₦2 000 m⁻³, the re‑planting cost is ₦20 000 ha⁻¹, and the discount rate is 5 % per annum. Using the Faustmann formula for the present value of an infinite series of rotations,
$$PV(T)=\frac{P\,V(T)\,e^{-iT}-C}{1-e^{-iT}},$$
where $P$ is price, $C$ is re‑planting cost and $i$ is the discount rate, determine the rotation age $T$ (in whole years) that maximises the present value. Provide the optimal $T$ and the corresponding maximum present value (rounded to the nearest thousand naira).

Question

Accepted Answer

Optimal rotation age = 30 years; maximum present value ≈ ₦63,000 per hectare

Neco Model Questions Vol1 2024 Agricultural Science Question 25

Answer Options

About This Question

Master the Exam!