NPV-maximizing rule
Not what you're looking for?
A classic problem in management of forests is determining when it is most economically advantageous to cut a tree for lumber. When the tree is young, it grows very rapidly As it ages, its growth slows down. Why is the NPV-maximizing rule to cut the tree when its growth rate equals the discount rate?
Purchase this Solution
Solution Summary
Proves why the NPV-maximizing rule is to cut the tree when its growth rate equals the discount rate.
Solution Preview
The growth rate slows down over the years.
As long as the growth rate is more than the discount rate it is advantageous to let the trees grow.
As soon as the growth rate equals the discount rate it is advantageous to cut the trees as the NPV will decline when the growth rate becomes less than the discount rate.
This can be shown by an ...
Purchase this Solution
Free BrainMass Quizzes
Situational Leadership
This quiz will help you better understand Situational Leadership and its theories.
Production and cost theory
Understanding production and cost phenomena will permit firms to make wise decisions concerning output volume.
Organizational Behavior (OB)
The organizational behavior (OB) quiz will help you better understand organizational behavior through the lens of managers including workforce diversity.
MS Word 2010-Tricky Features
These questions are based on features of the previous word versions that were easy to figure out, but now seem more hidden to me.
Paradigms and Frameworks of Management Research
This quiz evaluates your understanding of the paradigm-based and epistimological frameworks of research. It is intended for advanced students.