User's manual for TIMRET: a microcomputer software for silviculture
Contents
1. Figure 1 Output from TIMRET showing profitability analysis of lodgepole thinning at three different financial criteria a Present net worth c Profitability index b Benefit cost ratio pe ESES RSSRSS s s P3333339 bj T oro g E e l a TITO ozozOo Teo ze ze ze eza SS RS SS SSSI SS a Sos SS SS AA AAA SORIA e a 8 ig y 3 ar 3 E UY uoa pu pus Eo APPENDIX 4 TIMRET QUICK REFERENCE The basics of using TIMRET TIMRET is a Lotus 123 Worksheet equipped with a number of macros to help the user work efficiently All macros are executed by using an Alt lt letter key gt combination In order to run a macro the Alt key must be held down while the letter key is pressed All macros described below can also be accessed through the use of a main menu Alt M The macros also take advantage of Lotus style menus which appear at the top of the screen To use a Lotus menu move the highlighted cursor over the menu choice and hit the Enter key or simply type the first letter of the menu choice To edit blocks of data in the editing area it is encouraged that the user use the Lotus 123 commands of Copy Move and Range Erase Do not use Worksheet Delete Row or Worksheet Insert Row Other useful features available in Lotus 123 are the F2 key edit an entry and the F10 key redisplay graph Please refer to your Lotus 12. Treatment Stand age at activity or harvest year Description of Cost Benefit costs benefits items S ha S ha First Step Last Treatment Cost 400 25 1 25 Trees Removed by treatment 220 25 1 25 Market Value of Incr Yield 680 60 1 60 Log Size Premium 65 60 1 60 Logging Cost Reduction Conventional logging 880 60 1 60 FINANCIAL ANALYSIS Specified inflation rate 0 Discount rate Criterion IRR PNW S ha 70 09 122 18 B C ratio t e d 0 82 0 69 PI ratio Denotes the number of years between first and last activity Dentoes the difference in logging cost between untreated and treated stands APPENDIX 2 Computer screen display of TIMRET financial information on treatment cost benefit stand age at activity or harvest and financial returns at rotation COST BENEFIT DATA Treatment Stand age at activity or harvest year Description of Cost Benefit costs benefits items Sha ha First Step Last Treatment Cost 400 25 1 25 Trees Removed by treatment 220 25 1 25 Market Value of Incr Yield 680 60 1 60 Log Size Premium 65 60 1 60 Logging Cost Reduction Conventional logging 880 60 1 60 FINANCIAL ANALYSIS Specified inflation rate 0 Discount rate Criterion 3 4 5 6 8 10 Denotes the number of years between first and last activity Dentoes the difference in logging cost between untreated and treated stands 16 APPENDIX 3 10
3. 9 Long e Pe a aaa a it as oe ARA 9 Save load Delete ta oh EA LAS A y A A 10 Saving the Current e PN EESE ELLET LELEL ELIET aa 10 Penova Case gt carnada as ta de 10 Advice Whien UsingsTIMRET any AAS A Ta DEN 10 Distinguishing Cases from Worksheets o oocooooomocmmmo 10 Making Backups Verifying Inputs Additional Information AcknoWledgiments 0 cbse soos teem Basle se Raa o os Seales eee 2 List of Suggested Readings 3 5 4 os spore ovine ve bn wastes Basie ae BSS sg eee 13 APPENDICES APPENDIX 1 Definition OL TES o a Dat Neo IO AG sae 6 APPENDIX 2 Computer screen of TIMRET financial information on treatment cost benefit stand age at activity or harvest and financial retums fabs TOtALON EOS a AR A EN Nice eee NN 17 APPENDIX 3 Output from TIMRET showing profitability analysis of lodgepole pine thinning at three different financial criteria 0 0c cece ee eee 8 APPENDIX 4 TIMRET Quick Reference al VAS Ree ig ares Ren Nose 0 Introduction In today s increasingly complex decision environment the forest manager needs a simple quick user friendly and flexible financial analysis software to help make decisions about possible forest management scenarios TIMRET a recently developed forestry investment analysis software package is a tool intended to meet this need TIMRET is an acronym for TIMber RETurns This software package can be run on any IBM compatible personal computer which h
4. E EEL E EET T T fave oS ohare 8 oie E ETT E TTE 1 Starting TIMRET a kora sane AS as aaa Bebe aed as LELAS SEIAS E 1 REnMINOlORY Ar aed A OME Shed SS E 2 Einancial A alysES EIA A A Aa 2 Management Scenario Analysis xs coa dsccacine easter ees acetate ase ale avage vata s amp 2 Marginal Analyses LG A ee SES Remotes Fae K Starting and Ending Analysis Cases Some Year Markers 22 E A sici2 seas id Bee 3 Entera Dala A Meares EA ELATIS TAATITIA ETONE ra meson aN 4 iGo ars sos aps jacsta to mee ta Ges sale pete ts 4 Gosts Benefits cit stars Pele SSG ee OT a aa 4 TIE Of Treatments late siege eens dl aoe E soaks ate tac ations 4 Economic Parameters ii a Es 4 Editing Data o o ds o TETEN 5 Typeover Edit Mode Treatment lt 5 24 6282 NS ES ET E een eae on 5 Description Present value ha First year Last year Step year Economic Parameters Discount Rates Inflation Rates Discounting EOK Cash Blows o perean seo es Ed es Sere AA AGHIVIt A ET ds ia eta 7 Financial Analysis RESU S oir ds a a aa ae ee T 7 Tabular Presentation 2023 010200 o ts i Seed TANA NE 7 Internal Rate of Reto ORRY in it aaa 8 Present Net Worth PNW Profitability Index PI B netit CostRatio BiG 2 A A a cen a a 8 ii Graphical Output 0 ia aS SAI Ro nee SEAT aR NED saad oped 8 Solutions to Unique Problems ey asnarin 00 cece ese ESARET ETISKE 9 Too many C shPloWS wees cars Ose he os Cw het ata ate eden s
5. Publishing Inc Columbus Ohio Fraser T Tustin J R Szumidlo Z 1977 Financial evaluation of forestry projects New Zealand Forest Service Wellington N S Inf Ser 75 Gittinger J P 1982 Economic analysis of agricultural projects 2nd edition The John Hopkins University Press Baltimore and London Gregerson H M Contreras A H 1979 Economic analysis of forestry projects Food and Agric Organiz of the United Nations Rome FAO Forestry Paper 17 Gunter J E Haney H L 1984 Essentials of forest investment analysis Oregon State Univ Book Stores Inc Corvalis Oregon Hawkins C J Pearce D W 1971 Capital investment appraisal The MacMillan Press Ltd London and Basingstoke Hannula O 1971 The effect of average stand diameter on tree length logging cost Pulp Pap Mag Can 72 2 96 100 13 Heaps T Pratt B 1988 The social discount rate for silvicultural investments FRDA Report prepared for B C Ministry of Forests Victoria British Columbia Honer T G 1967 Standard volume tables and merchantable conversion factors for the commercial tree species of central and eastern Canada Can Dep For Rural Dev For Inf Rep FMR X S Johnstone W D 1976 Variable density yield tables for natural stands of lodgepole pine in Alberta Fish Environ Can Can For Serv Ottawa Ont For Tech Rep 20 110 p Ondro W J Constantino L F 1990 Financial returns from fertilizing 70 year old lodgepol
6. 23 manual for more information on these and other editing commands The TIMRET macros Alt C Calculate When the user adds deletes or edits new data the results in the bottom window will not change In order to see the results of changes made this macro must be used 18 Alt F File This macro is used to bring a case into memory from disk or to save the current edited data to disk Using this macro the user can save the current case to disk retrieve a case from disk into memory or change the working directory Only files previously saved with TIMRET can be loaded in without error Alt G Graph This macro allows the user to graph PNW B C or Pl versus the discount rate The macro will prompt the user for the type of data and style of graph desired Once chosen the graph will be displayed on the screen Hit any key to return editing Alt P Print This macro is used for printing either the edited data and results or a graph of one of the economic statistics Once the user has specified what to print the macro will pause and tell the user to ready the printer Once the printer is ready the user should hit a key to send the selected output to the printer Alt W Window The economic results normally appear in a window at the bottom of the screen If full screen editing is desired execute this macro eliminate the window Simply execute the macro again to reestablish the window Alt X eXit Exits the user from TIMR
7. ET as well as Lotus 123 The user shouldmade sure that he has saved your data with Alt F before exiting
8. User s manual for TIMRET a microcomputer software for silviculture investment return analysis by W J Ondro and W Marshall 1993 Department of Natural Resources Canada Forestry Canadian Forestry Service Northwest Region Northern Forestry Centre December 1993 Ondro W J W Marshall 1993 User s manual for TIMRET microcomputer software for silviculture investment return analysis Department of Natural Resources Canada Forestry Can For Serv Northwest Region North For Cent Edmonton Canada Abstract This manual describes the usage of a micro computer software package TIMRET which was developed to aid the forest manager in evaluating profitability of silvicultural investments Retums from a range of investment scenarios e g forest renewal cleaning spacing thinning release fertilization and tree improvements can be calculated and compared by using any of the following criteria 1 internal rate of return 2 present net worth 3 profitability index and 4 benefit cost ratio TIMRET calculates returns from treatment costs and benefits such as increased yield size premiums logging cost reductions and product from trees removed by treatment The output of the financial analysis can be presented in a tabular and or graphical form Examples of these inputs and examples of TIMRET calculations are provided TABLE OF CONTENTS Page ADIOS NO Oe ei Be Sa ee apd HOS PR eR Oa EEL Ae ade Oe i Introdiiction UE
9. as a 3 1 or higher version of the DOS based LOTUS 123 spreadsheet package Inputs to the program specify management scenarios and discount rates The former may include forest fertilization spacing thinning release tree improvement and wetland drainage The program can calculate returns for any management practice which brings improved changed timber benefits such as increased stem wood yields log size premiums logging cost reductions from harvesting bigger trees and products from trees removed by treatments Appendix 1 The analyst can choosee the selected steps computer runs such as cost and benefits into individual cases files that may be saved on disk retrieved and modified for further analysis TIMRET enables the analyst to compute cash flow from investments before income taxes for six discount rates Summary of result can be displayed and viewed on the screen and or printed TIMRET can calculate financial returns per hectare a stand or a whole forest Each case is defined by a series of steps that specify costs and revenues Net revenues are generated from these steps and are subsequently used to calculate financial returns Stine TIMRET To start TIMRET insert the 5 inch TIMRET floppy diskette with the example attached The program can be run on a 286 386 or 486 SX or DX IBM compatible personal computer with Lotus version 3 1 installed Ensure that the directory containing Lotus 123 is included in the Path statement i
10. creen display of calculated financial criteria and a printed hard copy Figure 1 Appendix 3 This feature is also available on other distributed financial analysis software packages such as FIDME PC or QUICK SILVER software packages To display a graph on the screen execute the Graph macro Alt G choose the financial criteria to graph and then choose the style of graph Hit any key to return to editing To print the graph most recently plotted execute the Print macro Alt P and choose Current graph from the menu Solution to Unique Problems Too Many Cash Flows Long investment cases may result in more than 100 cash flows which must be reduced to conduct the analysis An excessive number of cash flows can occur from including several annual costs such as management fees and leases in the transactions One solution is to combine similar activities within a year e g all activities with the same tax treatment Another option is to combine costs or revenues spread over several years into fewer payments e g instead of annual management fee apply double amount every second year This will have only a minor effect on the outcome Long Investment Periods If it extends beyond 200 years Although this is unlikely to occur one solution would be to arbitrarily reduce the investment length to 200 years by compressing cash flows into a shorter period The present value after discounting of costs or revenues that occur in the distant future is v
11. cted or copyrighted Do not use the original program and data disks except to make additional copies Always Verify Inputs Look out for some of the following common errors that can be made when using this program important treatments left out especially costs errors in data number of years exceeds 200 relative year values are not correctly calculated Additional Information TIMRET Quick reference Appendix 4 may help in this software operation TIMRET was developed at Department of Natural Resources Canada Canadian Forest Service Northern Forestry Centre by William J Ondro Senior Research Economist Department of Natural Resources Canada Canadian Forestry Service who developed the original program concept design directed the work and wrote the documentation Wade Marshall Computer Analyst Consultant of Department of Natural Resources Canada performed all program design and coding of TIMRET and also helped to write the documentation Your comments and suggestions on TIMRET are encouraged and welcome Please contact William J Ondro Department of Natural Resources Canada Canadian Forest Service Northwest Region Northern Forestry Centre 5320 122 Street Edmonton Alberta T6H 3S5 Tel 403 435 7203 or 403 435 7210 Neither Department of Natural Resources Canada Canadian Forest Service Northwest Region Northern Forestry Centre nor the authors warrant this program in any way Department
12. e pine near Hinton Alberta For Chron 66 3 287 292 Ondro W J 1990 Benefits costs and profitability of precommercial thinning of three lodgepole pine stands in Alberta For Can North For Cent Edmonton Alta Unpubl rep Row C Kaiser H F Sessions J 1981 Discount rate for long term Forest Service Investments J For 179 6 367 369 Sudgen R Williams A H 1978 Principles of practical cost benefit analysis Oxford University Press Vasievich J M Frebis R Wiethe R W 1984 Quick Silver The Forestry Investment Analysis Program Version 2 0 PC Developed by U S Dep Agric For Serv the Southeastern Center for Forest Economic Research SCFER Triangle Park North Carolina U S A November 1984 14 APPENDIX 1 DEFINITION OF TERMS Increased wood yield is the difference between total merchantable volume in treated and untreated control stands at rotation age Market value of increased yield is the volume of increased wood yield multiplied by the market value of stumpage MARKET VALUE OF PRODUCTS FROM TREES REMOVED BY TREATMENT Trees removed by treatment is the total merchantable stem volume used for various products Their market value is the volume of trees removed multiplied by market value of stumpage APPENDIX 2 Computer screen display of TIMRET financial information on treatment cost benefit stand age at activity or harvest and financial retums at rotation COST BENEFIT DATA
13. ery small so the effect on the outcome is small A dollar received in 200 years is worth less than 0 1 cents today after discounting at 5 percent Save Load Delete TIMRET allows the analyst to save and load cases from a data disk To save load cases using a floppy disk it is a good idea to first change the working directory to the floppy drive This is accomplished by executing the File macro Alt F and choosing Directory from the menu At the prompt enter in the new working directory to be the path of one of the floppy disks e g A B Saving the Current Case Exectite the File macro Alt F choose Save from the menu and type a filename that identifies the case If this file already exists the analyst will be presented with another menu with three options Cancel Replace and Backup Choose Cancel to abort the save operation Replace to write over the old file and Backup if the old file is still needed Retrieving a Case Execute the File macro Alt F choose Retrieve from the menu and type in the filename of the case to be retrieved Advice When Using TIMRET Distinguishing Cases from Worksheets There is no way to distinguish a saved TIMRET case from a regular Lotus worksheet To avoid error and confusion save all TIMRET cases on separate data disk or in a separate directory Making Backups As a precaution one should make a backup copy of the TIMRET disks upon receipt for safe storage These programs are not copy prote
14. escription This is a 30 character description of the cost benefit being entered e g market value of increased yield Enter a description which defines the entire investment cost benefit and return flow pattern Present Value ha Enter this value of cost benefit in units of ha A cost is entered as a negative number benefit as a positive number Because TIMRET allows unrestricted input for the description of the cost benefit it cannot determine whether a transaction should be a cost or a benefit so it is important to enter the present value with the correct sign but the program does check for this type of error First Year Relative to year 0 in which the cost benefit occurs This is a required input for all costs benefit analysis Last Year Relative to year 0 in which the cost benefit occurs The actual number for the last year must equal or greater than that in the first year If the last year is equal to the first year the costs and benefits incurred in the latter will also apply to the former year Step Year Is the number of years between each occurrence of the cost benefit This is entered only if the cost benefit occurs more than once If the cost benefit occurs in a single year the field should be set to 1 y First last and step years are expressed as stand age at renewal treatment and harvest TIMRET establishes the base year as the earliest year the year with the smallest number Length of investment i e the differe
15. estore the results window A complete activity list can be printed by executing the Print macro Alt P choosing Text from the menu and typing in the number of lines that need to be printed Financial Analysis Results Tabular Presentation Financial returns are computed Appendix 2 after executing the Calculate macro Alt C and selecting the Calculate option Within a few seconds the results will be displayed in the financial analysis section of the screen The four financial criteria are shown for the six discount rates selected Internal Rate of Return IRR is the discount rate which equates discounted costs and revenues IRR is the return on investment if all immediate revenues are reinvested in the project IRR is not affected by the discount rate but is shown in each column for convenience If the IRR can not be determined then ERR i e displaying error will be shown Present Net Worth PNW is discounted benefits less discounted costs A positive value indicates return exceeding the discount rate Benefit Cost Ratio B C is the present value of the benefits divided by the present value of the costs A value greater than 1 0 indicates that the discounted benefits exceed costs Profitability Index PI is the present net worth divided by treatment cost used to rank investment in an order of profitability Graphical Output The built in graphic capability of the Lotus 123 version 3 1 TIMRET package allows instantaneous on s
16. n the Autoexec bat file i e path C 1123R3 Type a tima enter enter enter if your 5 inch drive is called a Upon execution a title screen will appear for a short time after which the preloaded example see Appendix 2 will appear Terminology REVENUES BENEFITS appear as positive number on display and printouts COSTS appear as negative numbers on display and printouts TIMBER YIELD AND DEPLETION expressed in dollars per hectare ha All gt timber volumes are converted to m ha for computing volumes for a stand or forest The volumes are multiplied by market value of stumpage in m or fom and entered CASH FLOWS assumed to occur at the beginning of the year So costs or revenues occurring in year 1 are discounted for one year DATA Steps describing forest management practices may be specified and entered in any order Press lt RETURN gt key after every entry cursor control is done by the arrow keys gt lt TL Financial Analyses The software can compute returns for management scenarios that include several treatments or can evaluate profitability of a specific treatment either for a portion of a rotation or the whole rotation Management Scenario Analysis Most financial analyses are done to find out treatment profitability for a stand or an entire forest In order to analyze various management scenarios the analyst should specify all management activities or practices from the star
17. nce between the first and last year may not exceed 200 years Economic Parameters Discount Rates are annual rates in percent and may be real without inflation or nominal with inflation values Inflation Rate is the average annual rate in percent expected over the life of the investment Use an inflation rate of 0 for analyses done in real or constant dollar terms Discounting All cash flows are treated as if they occur at the beginning of the year Therefore costs and revenues that occur in year 1 are discounted for one year i e to the beginning of year 0 Cash Flows Each activity is expanded into one or more cash flows A cost or revenue amount is calculated for the first year and repeated every step year until the last year If the first year is the same as the last year only one cash flow is computed No cash flows will be computed for years beyond the last specified for the transaction The extended cash flow amount is computed where N is the number of years from the base year of the activity Activity List A list of cost benefit activities is displayed at all times except when displaying a graph or calculating financial criteria Several activities are displayed at once but the user can scroll through all of them by using the arrow keys and the Page Up and Page Down keys A full screen activity list can be obtained by executing the Window macro Alt W to eliminate the results window Simply reexecute the Window macro to r
18. o edit data Typeover One way of editing is to move the cursor over the cell that needs to be changed and type in an new value This is done while in the default typeover mode known as a READY mode See mode indicator at top right corner of screen Edit mode This is through entering the EDIT mode This mode is useful when the analyst wishes to avoid retyping the contents of the entire cell To edit data using this method move the cursor over the cell that requires editing and press the F2 key See mode indicator change to EDIT The current value of the cell will appear at the top of the screen for editing Use arrow keys to remove characters and backspace or delete keys to delete characters All other character keystrokes will cause that particular character to be inserted at the position of the cursor Press ENTER when satisfied and the mode will once again be in the READY mode Press ESC any time during editing to abort the edit Treatment Specify activities which are expressed in costs and benefits for the investment The speed and reliability of the analysis depends on how activities are entered and specified Erroneous specification of activities will produce wrong analyses TIMRET checks for and alerts the user to obvious entry errors such as a positive cost or negative benefit but cannot check for treatments cost e g 400 ha for thinning is as valid as 40 ha The analyst may enter up to 100 transactions per case D
19. of Natural Resources Canada will not be held liable for damages of any kind that may result from the use of this software All efforts have been taken to ensure that this software performs as 11 described TIMRET is within the public domain and may be copied without restriction Trade names are mentioned for information purposes only Their use does not constitute an endorsement by Department of Natural Resources Canada Canadian Forest Service Northwest Region nor the authors Acknowledgments The authors thank D MacIsaac Department of Natural Resources Canada Canadian Forest Service Edmonton Alberta for providing useful review comments 12 List of Suggested Readings Anderson F J 1979 Ontario reforestation policy benefits and costs Can Pub Policy 3 1 336 347 Alemdag I S Honer T G 1973 Relationships between breast height and stump diameter for eleven tree species from eastern Canada Environ Can Can For Serv For Manage Inst Ottawa Ont Inf Rep FMR X 149 14 p Brumelle S L Carley J S Vertinsky I B Wehrung D A 1988 Evaluating silvicultural investments An analytical framework FEPA Research Unit Univ Brit Col Vancouver British Columbia Working Paper 116 Buongiorno J Giless J K 1987 Forest management and economics MacMillan Publishing Company Ltd New York N Y Cassler G L B L Anderson Aplin R D 1984 Capital investment analysis using discounted cash flows Grid
20. ormation for each of the following Title It contains description of cost or benefit To enter a title move cursor to the left most column A and type it Costs Benefits It describes and gives numerical values to treatment costs yields products and prices To enter a cost benefit type the negative cost value into the cost column B or the positive benefit value into the benefit column C Timing of Treatments After entering description and numerical values of the cost or benefit the timing of the treatment must be specified The first year of the treatment is entered in the first year column D and the last year of the treatment is entered in the last year column F The number of years between treatments is specified in the step year column E Economic Parameters These are the discount rates and inflation rate Default values are provided upon initial execution of TIMRET macro To modify the economic parameters execute the Calculate macro Alt C to get the Calculate menu Choose Inflation to modify the inflation rate or Discount to modify one of the discount rates The new values are entered at the top of the screen To restore default discount rates execute the Calculate macro then choose Discount and then choose Default Editing Data Data error checking is performed upon an attempt to calculate financial criteria If an error occurs or information simply requires change editing will be desired There are two ways t
21. t to the end of the rotation Results of the analyses will reflect the returns for the treatment s cost and their timing Marginal Analysis These determine the effect of an additional treatment such as better site preparation thinning or more fertilizer on wood yield Financial retums are based on cash flow differences between a stand that received the extra treatment and the one that did not Starting and Ending Analysis Cases A typical forest investment starts with the establishment of a new stand or a forest but TIMRET may begin or end at any specified time Often the starting point is a major expenditure or treatment The analyst need to identify the first and last investment activity Beginning activities include site clearing site preparation natural regeneration and planting Some intermediate treatments such as cleaning spacing thinning or fertilizing may be beginning activities for other investments Ending activities are usually final harvests and timber disposal Year Markers TIMRET sets the base year for the investment at the first specified activity All cash flows are discounted back to this If an earlier base year is desired add a null activity e g C B O to set it Entering Data An analysis requires four data groups which must be entered to identify and define a case The data entry order is arbitrary For data input example see Appendix 2 To add an entry move to an empty row of the editing area and type in inf
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