A Company Owns a Tract of Timber That Will Keep

question 91

Multiple Choice

A company owns a tract of timber that will keep growing for a number of years.It calculates that the timber's value less the cost of harvesting is currently $50,000 and that this figure will grow by 10% in the next year and by 5% in the following year.If the cost of capital is 8%,when should the company harvest the timber?

• A) today.
• B) year 1.
• C) year 2.
• D) harvest a third of the timber each year.