ECONOMIC FEASIBILITY OF WUFACTURING COM-PLY STUDS 

IN THE SOLTH 

Gerald A. Koenigshof, Principal Wood Scientist 

Forestry Sciences Laboratory 

At hens , Georgia 

Cooperative Research by 

U.S. Department of Agriculture, Forest Service 

Southeastern Forest Experiment Station 

U. S. Department of Housing and Urban Development 

Division of Energy, Building Technology 

and Standards 
PREFACE 

This rsport is one of a series on the possibilities of producing house framing 

and structural 2anels with particleboard cores and veneer facings. These CON-PLY 

or composite rrLat~rials were designed to be used interchangeably with conventional 

lumber and p?gpodi? a homes. ResarcE OD srructurak franrhg was snittally limited 

to CON-PLY studs bur nas now been extended to include larger members such as floor 

joists. 

In 1973, the home-building industry faced a shortage of lumber and plywood 

and consequent rising prices. Both industry and government recognized that this 

situation was not a temporary problem, and that long-range plans for better using 

the Sation's available forest resources would be necessary. 

The Fbrest Service of the U. S. Department of Agriculture and the U.S. Department of Housing and Urban Development accelerated cooperative research on ways to 

utilize the whole tree. They concentrated on composite wood products made with 

particleboard and veneer as a way of using not only more of the tree stem, but also 

using less desiraple trees and a greater variety of tree species than would conventional wood products. The particleboard which comprises a large'portion of COM-PLY 

studs and joists is made from chipped-up wood that comes from forest residues, mill 

residues, or low-quality timber. Thus, such composites could greatly increase the 

amount of lumber and plywood available for residential construction, our major use 

of wood, without eroding the Nat ion'sf t ilnber supply. 

Research on composite wall and floor framing was performed by the Wood Products 

Research bit, Southeastern Forest Experiment Station, Athens, Georgia. The American 

Plywood Association cooperated in these studies by designing and testing composite 

panel products that are interchangeable with plywood. Both types of products have 

been incorporated in demonstrat ion houses. 

Included in this series will be reports on structural properties, durability, 

dimensional stability, strength, and stiffness of composite studs and joists. Other 

reports will describe the overall project, compare the strength of composite and 

solid wood lumber, suggest performance standards for composite lumber and provide 

construction details on houses incorporating such lumber. Still others will explore 

the economic feasibility of manufacturing composite lumber and panels and estimate 

the amount and quality of veneer available from southern pines. These reports, 

called the COM-PLY series, will be available from the Southeastern Forest Experiment Station and the U. S. Department of Housing and Urban Development. 
CONTENTS 

Page 

FINAIJCIAL FEASIBILITY ANALYSIS ........................................... 2 

PROCESS USED FOR EliLYUFACTUm ........................................... 2 

INVESTMENT U'TQUIREMEPJTS ................................................ 2 

Land ................................~............................... 2 

Buildings ........................................................... 3 

Facilities .......................................................... 3 

Machinery ........................................................... 3 

Cash ................................................*............... 3 

Inventory ........................................................... 5 

Accounts Receivable ...... ............................ 5 

ngency ............................................ 

FLOW OF MATERZALS ...................................................... 5 

OPERATING COSTS ............................... Unit Materials Cost ........................ Wood ............................................................. 9 

Particleboard Resin .............................................. 12 

Resin Catalyst ..........................................*........ 13 

Particleboard Wax ................................................ 13 

Laminating Adhesive ......................................... .. 13 

Total Materials Cost . .............................. ........... 13 

Labor Cost .......................................................... 13 

Energy Cost ................................................. 14 

Other Production Costs .............................................. 17 

Depreciation Costs .............................................. 17 

NET CASH nows AND INTERNAL RATE OF RETURN ............................. 22 

DISCUSSION AND C0NQ;USIONS .................................................. 25 

LITERATURE CITED ............................................................ 26 

iii 
The Forestry Sciences Laboratory, Wood Products Research Unit, acknowledges 

the valuable assistance and guidance of: 

Harold Evans 

Consultant for Plywood and 

Panel Products 
ECONOMIC FEASIBLLIn OF MUFACTURZNG COM-PLY STUDS 

IN THE SOUThI 

Abstract.--me hveskment and production cost required to =nufacture CON-PLY studs ts~ the South are presented, It is possible 

to abtah a 20 percent or greater isbtesnal rate of return on an 

bvestment fn manuf asturhg COM-PI V studs. 

KEmOmS: Manufactcrr~-g costs, stud cost, economics of stud mnufacture, cost analysis, ai"d-PLy factory, rate of reti-m, 

@operat lve research by ths Forest Service, il, S, Departmesit of Agriculture, 

act the U,S, Departmentoof Housing and Urban kvelopment has Led to development 

of a new composite lunber product. The new product, called (li?X-PLY, has potential 

for significantly iazcreashg our supply of lumber for buiiiihg homes, COM-PLY 

lumber is a structural sandwich construction with a partle:i.b.sard core lietween 

layers of solid wood veneer, 

The first composite lumber product developed was a 2 x 4 wall. stud typically 

used to frame exterior walls in. houses (fig, I). GOM-PLY studs are intended to be 

used as direct substitutes for conventtonal studs of sawn Eunber msld must be priced 

eompetitlve$y. 

Figure I ,--CBH-PLY stud used for framing exterior walls of houses. 

Potential mmufaeturers of COM-PLY studs want to how how muck it will. cost to 

mke them, They also want to how if a eOM-?ILY stud factory would be a profitable 

hvestment, one that would give a greater return on the investment than a sawmill, 

This report presents estrintates on the a~ou?rr: of investment required to build a 

COM-PLY stud factory; the cost of mmufacturing COM-PLY studs ; the annual sales 

and operating cash flows; ad the annual. net cash flows and lnternal rate of return. 

A study of f baneial feasibility is only as good as the validity of the assumptions upon which it is based. In this study, we assume that the factory is located 

in Arkansas and uses both hardmod and southern pine for its mod supply. The 
assumptions con~$ming costs: are based oer kndustry averages Md therefore do not 

reflect. value.d I ~tr .ai 1 ~pec~k-~c COI~ 

Results presented in this report are no guarlmtee that any firm can profitably 

manufacture CON--PLY studs--profitability depends on competent managerial skills, 

market demand, production efficiency, and other business factors. However, the 

results strongly indicate that it is econam;ically feasible to manufacture COM-PLY 

studs. Although a specific firm's assumptions about price, cost, and quantity 

may vary from those t the 

overall conclusion 

FLEU'MCIAt FEASIBILITY MALYS IS 

any an al feasibility are greatly affected 

for ma ef explanation of the process u 

reader. In this analysis, 1 -1/2-inch-thick p a r t i c l e b o a r 

oot-wide by 24-foot-long multiplaten hot-press with 20 openin 

The press completes five cycles each hour, and each cycle consists of 10 m 

curing time and 2 minures for loading and 

specific gravity of 0.6. Six percent 

weight of wood 2x1 the particleboard) i 

inch thick), and 6 percent catalyzed ph 

(1 inch thick). Wax is used at a rate 

The particleboard is cut into strips 1-1/2 inches thick by 2-1/2 inches wide and 

8 feet long to serve as cores for GOM-PLY studs. 

Veneer, 1/4 inch thick by 8 feet wide, is rotary-cut on a standard veneer 

lathe. After drying, the veneer is passed through a clipper with knives equally 

transfered laterally into a lumber edge-bonding machine. The edge-bondine. machine - - - - 

could utilize heated platens or radio frequency (RF) curing. In this study, four 

RF-curing edge-bonding machines were required to balance the production rate of the 

particleboard press. After the veneers are lqminated to the particleboard cores, 

the studs are hot-stacked for final curing. Later, studs are run through one ma- 
0 f 

whi 

0 Vf 

Ian 

squ 

at 

for 

add 

the 

a 1 

and 

at 

ana 

suf 

nee 

co s 

Pat 

~gs. In this studiy, tk Aog tory was assu 

i wo&d+requge the fa~ger si Land-developin 

lead, azfd 'coxxtitlg&cles were ed to be $k3,4 

and development was $281,910, 

A main building with 550,000 square feeL constructed at a cost c 

re foot, and miscellaneous small buildings with 3,000 square feet, 

cost of $10.98 per square foot, resulted in costs 05 $1 

eering design, canstruction overhe 

c building cost, for a tot 

FaciLit ies 

(water supply and sewer) 

uel storage 

(gas and. dies&, tanks and B 4. 

Xnside electr ical-equipment - - (installed) 528,O 

Inside piping 

(air, water, sewer) 

Engineering, construct ion overhead, 

and contingencies 

To t a1 

chinery 

In thi% study, it was assumed t&at new machine 

;t of machinery and machinery costs f~r the CP 

;ize of machines required depend ,on the f16w u h 

)ic discussed later in thi Y 

rsis is $8,136,075. 

im 

1 c 

$ E 

d < 

t ir 

r 'f 

e r 

abl 

Tnc 

LY, 

c ing , ;t of 

iO per 

zructed 

5,900 

zncies 

ildings. 

;. make 

1 is 

lumber 

ictory, 

is 

L is 

lash 

ibor 

: ca- 
Table 1.--Machinery and machinery cost for a COM-PLY stud factory 

Machinery or associated item 1 Cost I 1 Hachinery or associated item 1 Cost 

-- 

Dollars 

Log storage and handling equipment 182,250 

(unloaders, storage skids, sprinkling, and facilities) 

Log barking equipment 445,000 

Machinery foundations and supports (installed) 187,000 

Block handling equipment and steam vault 2 38,000 

Boiler 189,000 

Log conveyors to lathe and foundation. (installed) 41,850 

Lathe and charger (installed) 261,900 

Trays and tripples (installed) 75,600 

Green clipper (installed) 96,000 

Green veneer sorting line (installed) 

Green veneer conveyor 

Fiber dryer emission control equipment 

Fiber screen 

Glue mixing, pumping, and metering equipment 

Two blenders (installed) 

Forming felter and caul line 

Dollars 

20,250 

8,100 

22,950 

83,700 

89 3,025 

Particleboard press (4 ft. x 24 ft.--20 openings) 2,059,425 

Board stacker and conveyor 218,700 

Core-cutting saw with feeder and bins 96,600 

Laminating glue spreader 81,000 

Stud-laminating machines (installed) 

(4 RF curing or 6 lumber edge-bonding machines) 575,000 

7,400 Eased edge machine 56,700 

Green veneer chipper and conveyor (installed) 71,550 1 1 Inspection line 2,700 

Core chipper (installed) 

Eark conveyor (installed) 

Chip hand1 ing t acili ty 

Dryer (installed) 

Dryer feeder 

Dryer unloader 

Moisture meter 

Labeling and marking machine 

Packaging and strapping machine 

Forklifts and carts 

Air compressor (installed) 

Y:+intenance equipment and small tools 

Spare parts and quality control equipment 

Sweeper and yard truck 

Dry sorting chain 13,500 1 1 Storage tanks 81,000 

Dry veneer strip clipper 31,750 11 Storagebins 54,000 

Dryer en~issio~l control equipment 36,450 1 ( Air conveyers (blowers, cyclones, piping) 113,400 

Flaker 

Fiber dryer 

Freight in for machinery 

Total 
Inventory 

Investment is required to buy raw materials and cover cost of materials being 

processed and i? finished products awaiting shipment, In this study, itwas assumed 

that one-sixth of the annual cost of raw materials for a factory operating at full 

capacity would be sufficient to cover all requirements for inventory investment, 

It will be shown in other parts of this report that the total annual. cost of raw 

materials for this study is $13,232,010. Therefore, the investment required fur 

inventory would be $2,205,335. 

Accounts Receivable 

A considerable investment is required to cover sales to czstorers vha di; not 

pay immediately for the products purchased. Such customer accounts--account s 

receivable--;nay typically be paid in 10 to 60 days, T'ne average co;lectxon period 

from cdstomer sales was assumed to be 30 days, Investment to ccver accounts receivable was considered to be I month (30 days) of sales. Sales will vary with 

the unic price received for products and the quantity produced each year, Three 

unit ijric~s were used in this study; but at an average first-year sales price of 

$L30/M board feet, there would be sales of $24,710,400 per year, For this study, 

the investment required for accounts receivable would be $2,059,200. 

Contingency 

The investment for any individual item such as Land or buiLa.urigs ma?; vary from 

the amounts assumed or there could be investments for items that might not be evident until factory construction and operation begins, Therefore, to be o;i the safe 

side, a contingency investment amounting to 5 percent of all other iavestmeuts has 

been used m this analysis. The total of all investments u~ to this point is 

$10,255,424. Five percent of $16,255,424 is $812,771, which is the coneingency 

investment for this study. The time when an investment is made is important in 

an economic analysis. Cash invested in a factory could also have Seen invested 

in securities and thus be earning interest. In this study, we assume chat the 

major capital. investments would be made during the first 3 gears of factory operation. Table 2 shows the amounts and timing of investments made for this study when 

an average unit price of $130/M board feet is received for COX-PLY studs in 1975. 

The total investment for a new COM-PLY stud factory is $17,068,145, 

FLOW OF PL4TERIALS 

Forest products manufacturers with whom we worked in making this study said 

that creditability of the results would only be as good as the assumptions xde 

about manufacturing cost. They said if detailed information is provided in this 

study, then they could use the information to make similar studies of their own by 

adjusting our assumptions to fit their own manufacturing operations. This section 

on flow of materials contains much of the detailed information upon which operating 

costs are based and may be skipped by readers more interested in results of che study. 

Once the size and operating speed of the particleboard press has been selected, 

it is possible to calculate the flow of materials through the factory, Table 3 

provides some of the specific assumptions made with regard to particlebcard nanufacture. Maloney (1 973) has shown that I-1/2-inch- hick particleboard could be 

cured in a minimum of 10 minutes with catalyzed phenolic resin and a piaten temperature of 430' F. The catalyzed resin is needed only in che core of "ie particleboard 

because the face layers will reach curing temperatures tn less rLlan 40 minutes with 

micatalyzed resin. About 1-112 minutes are typically req~ired for press lo~ding, 

unloading, and closing, Therefore, 11-1/2 minutes wocld be the minimcm c~cle time 

for making 1-1/2-L1ch--thick particleboard. To be on the safe side, cycle the was 

rounded to 12 minutes or five cycles per hour, 
Tcie 2,--Let Investment required for the first 3 years of factory operation 

- - - - - - - - - - - - - -Dollars- - - - - - - - - - - - - - - 

Land 281,900 0 0 0 281,900 

Buildings 0 612,300 1,224,600 0 1,836,900 

Facilities 0 1,086,400 271,600 0 1,358,000 

Hachine ry 0 2,712,000 5,424,100 0 8,136,100 

Cash 0 126,000 252,000 0 378,000 

Inventory 0 735,100 735,100 735,100 2,205,300 

: heginning of/ End of 1 End of 

Lnvestrrent 1 first year 1 first year / second year 

Accounts 

receivable 

End of 

third year Total 

Contingency 62,800 150,000 250,000 350,000 812,800 

Net iaves tment 344,700 6,108,200 L18, 843,700 1,771,500 17,068,200 

I1l?his total differs from the values in the column above because of 

rounding. 

Table 3.--Values assumed for production variables in order to calculate flow 

of ateri rials through the particleboard section of the COX-PLY stud factory 

Variable 

Ket width of press 

Net length of press 

Press opecings 

Press cycles per hour 

:ili.owaiice ror ~jidth trim 

Xilowance for length trill 

Specific gravity of particleboard 

Resin solids in face layer of board 

Resin solids in core layer of board 

Catalyst in face Layer of board 

(liquid basis) 

Catalyst in core Lnyer of board 

(liquid basis) 

Wax soiids in face layer of board 

Wax solids in ccre iayer of board 

Orher solids ia resin used in face layer 

(percent of resin sclids) 

Other solids ii~ resin used In core layer 

(percent of resin solids) 

Solids in catalyst used in face layer 

Solids in catalyst used in core layer 

Average specific gravity of wood supply .5? 

I Value 

Ratis of ii(>ec! weight in core to wood 

weight in face 2 

Feet Number Amolmt Percent 
On the basis of tht. 

the hourl!~ flow 

(table 4)- Iri 31 

the rtitio ~f green woo 

PsrEicleiear$ pres;a< 

Lvenlried wood 

O.:endried tinod 

Green wcod frcm p 

be chippei: 

Green wood faearl CO; I .iste ?see; iritii v--?r,ter 

Resbl: solids in. core -~i, 

Liquid catal jsr in f ,.r~ , 

ijtiler soLld3 from 

in face ard core 

At the factnry, th 

having a kerf of 0,125 

per hour, Net zeruir 

wsste mst be ad 

cnmputea hcurly 

processed at the 

These quanti 

vided information u.1 

~l:aber, Far their 

were cut into veneer 

3.e grade and dry -~cli;,-~-. 

Table 5 shows the yifijs 

pine cider, 
that . <I(;:: - ~~7 .A. *.' scud wi;h I/&-inch-thick veneer cofirains 3il percent :r;neer 

(ass.jizi?g 5 +:;isr,:: vcnc;?~) 57 ~~ahuac. 3 COM-PI-T i-t;;d fac",q could ". llc~~~~~ ali ..-,,,, riuii - 2~5:. ;:itter veneer in 2 typical stand zrzd cnn-~err: "ie . - 

restof the wooe rBJ ?articlebi?ard, thereby proviiS51g tii~ii--tree c~tilization, 

Table 5.--Hourly fim of materials through veneer ad chip-preparation 

sections of a COM-PLY stud facrory at 100 percent efficiency 

Stud cores produced 5,400 

Dry veneer required for abcve stud 

cores Including 5 perceac waste 

Dry veneer required 473 

Green veneer logs required 1,507 

Green Logs to be barked 

8-foot peeler blocks to be peeled 

Peeling residues produced from 

cores, round-up, and spur trir? 

Green wood reqtiired in addition t3 

peeling residues to supply wood 

particles for particleboard cores 

(assumed to cone from tops of trees 

above height where peeler blocks 

occur) 

Small logs from upper tree stems to 

be barked for woad particles 

12-foot-bong small logs to be barked 

Water removed from green veneer 

during drying 

Water removed from green wood chips 

during drying 

One of the most important uses of table 6 is to compute ratios For the flow 

of veneer, veneer residues, and linear feet of logs through the fac~ory, Some of 

the more important ratios are shorn in table 7. Fer exzmple, table 7 shows that 

there will be 2.04 cubic frtt af green peeling residues, 9 veneer, and f ishtaiL 

produced for each dry cubic foot cf dry C and better veneer produced, Tbt ratios 

shown in table 7 were used i~ the, com~uter a3a:ysis tc ob"iin !?curly flow of wood 

products shorn tn table 5, 

For pruductic~: of' 5,ACiCI stilds .;er :lour ad spread rates of Li: 1b,!yft3 cf glue- - - iiae between verieers and SO ?b/?ff~"jiltween sfcqeers and the core, the hourly qijantities of phenol-resorcincl adi-~esive iacltdierig catalyst cafi be computed. Four 

hundred thirty-;we pmds i~i nixed adhesive worrLd be required per tour on veneerIre-veneer glue1 L?es acd 864 poxrids per hour on veneer-to-part PcLebcard glue1 hes. 

Operating costs are needed co deterrdne ann11aL net ezrnings or cash proceeds 

that will result fron the investment, Operating costs provide L~sighmrin how the 
cost of productng CO!4-PLYsttuds compares with the cost cf producing sawn lumber 

studs, The following discussion is concerned with operating casts to produce 

COX-PLY studs at 1975 ?rice levels, In this study, it is assumed that the factory 

operates 6 days per y~eek and 50 weeks pcr year, Out of each 24-hour day, it is assu:?;ed that there are 22 hours of useful ~ork. Efficieccy is thus about 92 percent 

or 0,6C)G hcurs ofproduction per year, Such high efficiency is possible because 

gnlv a s;i?qie itern is '?eir,p ~:lylp arid the siit:ry, 3rd s? :ir.:.i:- ----- &, L, .*.-:- 1,;j.I 1 !:e sr3.l 1 * 

<- -- 1 .>i : .. :, 3 . i r . :: /z-re c?fl.'lr- lc-icic-.. 31 about 

85 pcrrcexlt, 

Potent;ai rla-iGfac---r-c~; ,,:- C.I;!*;--;-L; ' :+yc. s, -( -,:I .,ocrce+; of wocd for fj?iir . . . ~ factory, ?r,c. ';lc:t%~:i 05 D,:~c-~,~::%, L; ~0 '3. ; "1 -i7-.'-~ :. ~J~zL- ' ~C~IC?I-T and ~OWP,CX-- 

- :j 1 rCS~;..i. r ... ,: - ifi~- iii :,, . L Ls~ la:~,3 : >d - L : , :. - , . _5lloj--;cr metkr~d t3 

T,-,-.-~ ;iiriiIiii~e "~ii treci-:mg~ir thibsr ~nd ~rortisi: ::" ;f +:,,. <,<>-?- .. ..< '>Lts.>,Ld mthcd is used, vcr~ezr =f =hi needed oualjt~; aiisr be prrilt-'d frcrl. t;in; :crtinn of the "-ri. -e.j.ifi 2 anon- . . iq-1 ~ji:i7;c5tc.~r cf 2 ;-rsc:;lEL; Lt;- :;zT,z6?r: . L I,$.-. .. At L!-.~ "-, ,ii-L~ i,r::; ; psl:;.:i..-; ~ s ;;rd po-"-in:zs of ehe 

tr?c to5 ~~ai.1 .;o ?F.~I :ru:"; be cc-Vc,-rrpJ tc: wc-.s<', ;;br-i,Tes f;-- t:ri; ~arti~lebaard, 1- - . L - .., - 

We ha-~e used :he c;ei.gnb metiad i~ ';!ti.-, <~cvJI.~ i?; ;Ile =,ant merhhcds pcssihle for 

purchasirrg woo? for C';I~f-PI,Y stud-, tlik ?I..- :-;;t rt:;;lits 21 !iigh~s~_ htem-al. rate - 4 ;,; return 31: ~h Cin-i~s;~t:~"4':~~i!.7 :;- ..* ''~7 --,i:lciiL,-c f T~T; -crep-leng~';. t irLber has 

dj ,tinct ad-jar;.iag2c; :~'i.iic:i uf"-;et ; ": c, -;,L +:::-r,l;:is, 

*One advantage of iisi;ig ii~l?-rrc-c-L-.-,~qtk.~ timber 2s that the parts of the tree 

- c-i3 c sliall to pee!., -is ;;.<.it E!.,: -a?' :. - . - r, .- - . . r~ .. --. : r7-;es .. ,. from rhe veneer operat:or, JCOI~S, '. roundup, spur-";i~c), ari. cLL:a-:er ,;?-! 05 ,r;lr.cr :,gelit.: Chan aiLi resii'j-es t;rpj.caEly 
ted from sucii a 

d scrap v,zoul$ be 

- 8 ,:L:mt, t::m-J ica.;r-s 

21r;o widr;:-ls f(>~ 

-,-, c:1c ,. r. LJ..- at the 

for gnm. Fnl1.- 

.i.,gs, Assuning 

be obtained 
this study, costs of green wood were assvmed to increase at a compound rate of 

7 percent per year, as tabulated below: 

Yearly period 

(dollarslcubic foot) 

Typically, prices of softwood timber fluctuate with prices of softwood lumber. 

However, when prices of pine sawtimber are rising rapidly hecs~~nc oi strang Eenand, 

tile price of hardwood usually remains relatively consfarit. Therefore, the cost per 

cubic foot of i mixture of hardwoods and ssitwoods would rro'~:l- not ~iralste as 

rapidly in a period of strong demand as the cost of snfir~c- z-:;. 

Figure 2---Flake-type particle made from peeler cores; they can he co~ted 

satisfactorily with 6 percent resin, 

ib 
The volume of veneer ir, a stud is about 20 to 30 percent of the stud volume, 

whereas the volume of C and better veneer in an average mixture of southern pine 

trees is slightly over 30 percent. In other words, there is a slight surplus of 

veneer generated in rnaking COM-PLY studs when full-length southern pine timber is 

used, Thus, these are opportunities to reduce wood cost by supplementing the factoryf s raw mod supply with low-cost, high-quality residues, such as waste from a 

plywood mill, 

Veneer for COM-PLY studs does not require high-quality timber, This study 

is based on veneer grades and yields of southern pine from timber of No, 2 sawlog quality, 

Potential manufacturers of CON-PLY studs must consider all the factors discussed and select the right cornbibaiatian from the wood supply at their disposal when. 

making their own analysis of economic feasibility. However, the quantity of resin 

required 3 oke a stud that wfil meet the quality standards for the produet is 

greatly L?fl.uenced by the type of wood used to make the particles, 

part icleboarll XESLI 

Figure 3 shows hdustrfai average prices for the phenolic resin used in 

particleboard on a 100 percent solids basis. From 1.955 to 1973, the prFce of 

phenolic resins steadily declined, Then in 1974 the price rose drastically as 

a result of shortages of petrochemicals and plant capacity. This study is based 

on the 1975 price of $0,31 per pound for phenolic resin and an estimated price 

increase at a compound rate of 5 percent per year. 

t 956 1960 1965 1970 1975 

YEAR 

Figure 3,--Price sf phenolic resin peer dry pound on a 100 percemt solids basis, 
Resir, Catalyst 

Research perfcmed for <'he Forest: Service a". Xazhinsigtors. State Cniversity 

showed that phenolic resir, binders for partislebnard cxi be cured L? ,960 m-hsatites 

at a platen temperature of 400" Xi" a catalyst is used to accelerate curi2g, 

kssu~lng that the time for j)resGs ~.s~L?zz, clesl.nii;, spenLng, and mlc?adring ciioes .' * :%. r exceed 7 minlltes, ir ti i>-s .- 13. : ' ' . --- . ..-. '. .~?-~~-i-~iP.~ i,ii..L .- gy;?er: cycle ('he tj-.se 

~-~~~~F;~ is this stad:?) k~hen a .-a&,z:vzec: r;-%f7; ' r;i,,tdL, :---:-T 4s used, I%.; i975 price. for 

tl\e r,a"iaiys?l was 3,48 per Liquid pola~i;, The anrumr cf 1iqui.d catal:jt required -. ic 6 percesz 2; :i;e iiry resk birider -6.3, CstaLysr Grice-, ape also estimatei; to 

i~crease at a c:sr~po-w~d satt- of 5 percent per :rear, 

ParticieG>zr d Wax 

Liq.;lid wax emulsions are adZ:d t.1- ?ar:icieboard I?.i order to redilce rhickneh;~ 

sxefiing wher the garticleboarcf is s,i;akisd .in water ztir short perii.~;~, x1$se e;r&- 

sicrns, ra;ighlv 5 i half ;.ax solids, wer~: ?r:.-fid at So,0$ -~ t .:lj ' ~(1 -~ovy-~s ,I 3-71 - '75 In 

this sr:idy, ;:e itied this 19'75 ?rice 5.ir L--, c,~c',.o_ ,.t>st;ne;% - p ir wo?;ld Lncrease 

a& a compa 51:. c; we.*- 1141~ ijf 5 percent per 

Laminat bag 4dhes F-;e 

Phenol-resorcinol agncsives that cure i,: .-,>am temperature ;are widely ased for 

Ismminating large structural ti-iibers, Such ad?. ; i-t;.: are 3 iiii~ture of five parts 

Liquid phenol-resorchcpI resin and one part ?a: . ' .>_.malildehj-de hardener Is:r weight, 

Costof tlxse adhesives when mixed was about Yi-:..51; per lit~uid p01m.d in 1975, ?he 

adhesives contah a lags percrl-taai.,c: of resorcho'L :? order iri; allow wring at 

ro<on temperature ii7 a few hours, biia: the adhesit~e <:a12 r;e cured with high-frenuency 

heathg zqui~r;aen"iin, just a few minutes, By redracing t?.:; ;lmcunt OF resirircinol 

resin and increasing the amount 317 phenolic resir?, the --:st :-c.*-? ., .,.d be reduced to 

about $9-25 per Iiqid po~sd, Two mjor ~amnfacrcreri; said r '..-.c the- xsubd: supply 

a 4am%fia~;arring resorcinsl-modif icd phenol adhesive that could be ctired w3l.a highfrequency heat at a cost of 9nl-j $C!-25 r,er mixed liquid pelr-rid .i:? 1975, Wc adopted 

this price for the present study and ass-ined that prices w0uS.d k1.6creiise a"i acornpound rake of 5 percent per year, 

Tctai rrnauaP cost for materials is fo~md by multiplying the quantity of materials flowing per hos~r tiaes 6,600 hsuzs per yrar timccs the mft price of t?:~ 

materials (table 8)- This cost was ralcokated to be $!3,232,010, 

tabor cil?sta vary wit11 the Levels of skill ilema-rded cf workers, fringe benefits 

paid, and geographic locat ton, Labar wag-~s have been rising rapidly since 1961, 

Table 9 was developed from industry reviews to show the wage ass~~=c-cincs iised in 

this stdy for ~zariocs le-~els 05 sklll from 1975 throngh 1985, We s3sunc23 ckat 

the factory would be built irs k"Knsas and pay ;rages h.cXudi_rrg fringe benefits at 

the prevailing rates -in that State, Table iO lists all of the job descriptions, 

number of workers, cumber of shifts worked, wage rate paid, hours worked per day, 

a~d daily lab.~r cost for each operation, Total daily labor cost was calculated 

to be $7,50?,G8, %is sum multiplied by the 309 days worked per year is the total 

annual Labor cost, At fdl production capacity, the an,nual labor cost at the 1975 

rate is $2,268,024, 

The annual cost for labor xkll escalate efporentially from year to year, as 

Lqdicated by the growth rate in table 9, Of cegrse, the iimomt of labor required 

during the beginning years will be less thm when the plant reaches id1 producti~x, 

In fact, during the first-year ccnstruction period (I975,8, there will be 30 dsrect 

labor east, 
Table 8.--Annual cost of materials for a COM-PLY stud factory 

Eio ur s --- -- -Dollars- -- - - - 

Wood (green-tree length) 1,921 ft 3 i( 6,600 X 0.&0/ft3 = 5,071,440 

Particleboard resin 2,646 lh(dry) X 6,600 X .3L/1b = 5,&1?,716 

Particleboard catalyst 106 lb(1iquid) X 6,600 X .48/Lb = 334,808 

Particleboard wax 459 lb(1iquid) X 6,600 X .09/Lb = 272,646 

Laminating adhesive 1,296 Ib(1iquid) X 6,600 X .25/1b = 2,138,400 

Total 13,232,010 

Table 9.--Estimated labor costs (including fringe benefits) of operating 

l/ a COM-PLY stud factory in kkansas from 1975 through 1985- 

---- -Dollars per hour- - - - - - 

1975 4.96 4.54 4 -02 

1976 5.23 4.78 4.24 

1977 5.51 d s ,, 4-4' r %: 

19 78 5.81 5- 12 4-71 

19 79 6.13 5,bi 4-97 

19 80 6.46 5-92 i % YL 

19 81 6.82 6.24 5,52 

1982 7.19 6.58 5.82 

1983 7.58 6.94 6.14 

19 84 7.99 7.31 6.47 

1985 8.42 7.71 6.83 

- 

L/lv'ages escalate by the amount 10 0'023(n-1) where n is L to 11 for 

years 19 75 through 1985. 

Energy Cost 

A CON-PLY stud factory requires two types of energy for its operation-- 

electrical and thermal. Some operations require both electrical and thermal energy, 

while others require only one. Actual energy costs depend on the volume of materials being processed, efficiency of the machinery, fuel type, and fuel costs. 

Table 11 lists the important energy-using operations in a COX-PLY stud factory 

and shows the estimated quantities of electrical and thermal energy for a given 

production unit per hour. For example, table 11 shows that drying chips requires 


Ib kCLillow;ltt hours 3f elecrr-bcaL energy for every greeil tan cf chips processed and 

i,bi)'i B~L of thami energy irjr every pound of water removed from the chips, Tke 

,riues fur energy shown Lr table 91 are estimates; actual values in a factory codd 

gar;. ~deLy, iiependkng on machine eff ieiency , 

Table 12 shows the energy co-nputairions. For example, the amount: of green wood 

+- be chipped and dried (from tablie 4) is 87,742 pounds per hour of peeling residues 

2nd 7,366 pounds per hsur sf srrall top logs. me total is 94,808 pounds per hour 

CP. S7,ic tons per hour. The estimated electrical energy required for drying chips 

is PI? hilowatt raaurs per greerr ton (from table II) times 47,4 green tons per hour 

or 853,2 kilowatt hours per t-ur, Table 5 shows that the amount of water removed 

from green chips is 50,711 p .ads per hour, The estimated thermal energy required 

to dry the green chips is cbtaaned 5.1 mt~ltlplyfng 50,711. pounds of water per hour 

times 1,800 Btu per pound of dater rewved or 41,239,800 Etu per hour, The values 

for electrical energy are based on fa15 -rated horsepower of motor-driven equipment 

and must be reduced to 70 percent of the \*aSues shown in order to be move realistic 

about actual loads 03 the motors, Far elecerilelty costfng $0,054 per kilowatt hour, 

the cost per year for electricity is $415,060; for thermal energy costing $0-07 per 

therm, the cost per year is $649,00G, Tke total snergy cost per year for this analysis is $1,064,000 in 1975, In this study the price of fuel. increases at a compmd 

rate of 5 percent per year, 

Other Production Ccses 

There are various other costs a:.-ociated with iirarmfacture that need to be 

accounted for in operating a factory.. These c~sts are best obtatned from accounting 

records of an actual factory; the aosuxrits sham in table 13 are rough estimates, 

Sales promotion expenses were arbitrarily assumed to be 6 percent of the 1975 

sales -if the plant had been operating at full capacity an@ were distributed over 

"te first 3 years ~r' operation WL declining anionts of 3 percent, 2 percent, and 

i percent of sales, 

kpreciat ion Costs 

k~reciatioa expense mush be computed in order to determine the mnufactur5r1g 

costs for studs and taxable L~ilcorne and to determine return on Erivestrnent, In deternhirig manufacturing costs, the straight-%he method of depreciatioe-: was use&; 

ir, detcrmiining return on the sum-of-the-years digit method was used, 

In this study, buildkgs, facilrities, and machinery were depreciated over the 

10-year investment period, 

MTSUiiL, SEES, OPER(ITLUG CAS9 FLOWS, AYE) TOTAL, W'JFACTL~RLNG COST 

The purpose of this section 5s to determine tke cask proceeds or net earnings 

that accrue tc the business as a resalt of n;anufaccurLqg operations, In computing 

net earnings, ir IS necessary fLrst to compilte revenue from sales and then to subtract mc;reufacti,rii~g costs and. taxes, 

Saxe ?rice has te be assumed for the product, In this analysis, therefore, 

the prices of CaM-PLY studs are assumed "i compete with those of sam kiln-dried 

sti~iis, 

It rs extreme%y difficult ea make accurare predictions of stud prices became 

"iq ffurtl~ate wioely with various economic conditions, The average f ,o ,be mill 

price of krln-lried Hem-fir studs was $6%.83/?4 board feet 1960 and rose to 

$454, L7/1+ board feet in I976 (Evans 1976). This rise in price is about hO percent 

cornpir;,;; grcrwth f3r a 10-year period, In 1935, the average f ,o*b, mill prlaie for 

riin-dried He=-fir studs was $h26,33/~ board feet, The year 1935 was a period cf 
recession, low home-building activity, and iov lumber prices, We therefore estimated that stud prices would increase at a lower compound growth rate sf 7 percent 

during the investment per-roc1 fx-or1 1975 to 1885--about 3 percent less grcwth than 

during the previous 10-year period. Three price levels for COY-PLY st~uds in i975 

were used in the study; the EirsC was assumed to be 5121.50/~ board feet, the 

second was assumed tc) be $130.00/?4 board feet, and the third was assuned to be 

$136,50/31 board feet. Since 1875 whs a period of relarively law lumber prices, 

the second price level probably most closely represents the base for the long-tern 

price trend for studs, Table 14 shows f.0.b. mill prices for CI):I-PLY sti;ds at the 

three ievels dir;ring the investment pertood. 

1' Table 12.--Estimated energy required per hour to produce CSbI-PLY 

Ener&v/huur -- 

Oeeration it ili? i t Ejecri-ical 1 IT~eimal 

kK h -- -- Btu 

Barking logs 0.Gt26 X 4,465.9 = 26.79 

Hogging fuel 30.000 X 7.6 = 210.!30 

Conveying chips 35.000 X 61.2 = 2,212.00 

Steaming blocks 110,000 .GO0 X 59.7 = 6,567,000 

Log cut-off 

Log sorting 

Peeling veneer 

Veneer drying 

Veneer drying 1,800.000 X 20,0G4,04 = 36,CCi7,362 

Conveying veneer .003 X 22,680.0 = 08.04 

Flaking wood 28.000 X 67.4 = 1,327.20 

tia11me~i11ing 20.000 X 47.4 = 948.00 

Drying chips 18,000 X 47.4 = 853.20 

Drying chips 1,800.000 X i0,7ll.0 = 91,279,800 

Screening chips .400 X 22,1 = 8.81 

Blending 8.000 X 22.1 = 176,80 

Fanning natt 5.000 X 24.8 = 124.~16 

Pressing matt 6.000 X 24,8 = 148.80 

Heating matt 140,000.000 X 21.8 = 

Heating cads 100,000 .GO0 X .O = 

Water loss 80,000.000 X 24.8 = 

RadFdti.cn ioss 9,000.000 :< 24.8 = 

Convection iess 8,000.000 X 24.8 = 

Finish stud .001 X 5,400.0 = 5.40 

Laminate stud 

Laminate stud 

Tot a1 

1 / 

- Factory 1s assumed to work 6,600 hours per year. HcurLy totals Lci 

k'Vh an3 Btu nus st be nultilplied by this vaius to obtain yearly totals. 

- Ll- r,ieetrical energy is 70 percent of rcotal in order to account for 

motors not running at full rated horsepower. 
Table 13.--?iiscellai~eoi:s production costs in operating a CO?l-PLY stud factory 

i 

Cost I I Percent sf I 

Percent / land, building, and Salary 

of sales1 facilities cost , (~n 1975) -- -- - -- - - - - -- 

Dollars 

Proauction sbp~lies 2.6 

General manager 

Off ice manager 

Office clerks (thres at $6,000 each) 

Grade-certificdtio;; fees 1.0 

Other dffice adnii~~istrative expenses . J c: 

Sales prono t ion 6.0 

Facilities maintenance 

Facilities taxes 

Facilities insurance 

Sales expense 

Contingency expense 

Table 14.--Estimared f. 0.h. mill prices for COY-PLk \tuds 

during the investment period from 1975 to 1985 

- 

Price level 

---- 

I (3) 

---- -Dollars per M board feet- - - - - 

19 75 123.50 130.00 136.50 

Given a choice between CCPf-PLY and conventional sawn studs at the same price, 

the builder probably would choose GO?I-PLY because they do not warp. Builders often 

recut 10 to 25 percent of their conventional studs into shorter lengths for use as 

blocking or short nernbers because of excessive warpage. Thus, builders might even 

pay a premium price for COM-PLY studs, although we have not made that assumption 

in this study. 

---- - 1 / Table 15.--Tenmyear cash flow from operations of a CO=Y stud factory- 

=Z!e!- - -- - - 5 - -- -- 1976 7 1978 -- 1987--1981 LJqRi- - - - - - - - - - - - - - - - - - - - - - - -lkousands of 

- 

dollar.- - - - - - - - - - - - - - - - - - - - - - - - - -- 

A. Sales 

COM-I'LY studs 0 5,288.0 22,632.7 30,271.3 32,390.3 14,657.6 37,083.6 39,6/9.5 42,457.1 45,429.1 

lernilnal salvage 0 0 0 0 0 0 0 0- _ ---- -- 0 _ _ - _ __- 206.0 -- lotnl 0 5,288.0 22,632.7 30,271.3 32,390.3 34,657.6 37,083.6 ~?,6_79.5 4Z4457.1 45,635.1 ==z--=z=--=-- ---~-----~--~---____------a__l_l--__ ------_l 

B. Raw materials 

Logs 

Parti rleboard resin 

ParticLeboard cntalys t 

Particleboard wax 

Laminating adhesive 

Total 

C. Production expenses 

Direct labor 

Power and fuel 

Prodr~ct i on supplies 

Maintenance supplies 

Utilities 

Total 

D. Administrative expenses 

General manager 0 26.2 27.6 28.9 30.4 31.9 13.5 35.2 

0 

36.9 38.8 

Of fire manager 18.9 19.8 20.8 21.9 23.0 24 .l 25.3 26.6 

0 18.9 

27.9 

Clerks (3) 19.8 20.8 21.9 23.0 14.1 25.3 26.6 

52.9 

27.9 

Grade-certification fees 0 226.3 302.7 323.9 346.6 3iii. 8 

Other 0 

396.8 424.6 

26.4 113.2 

454.3 

151.4 173.3 

lo tal 0 162-0 --- --- 52 198.4 212.3 227.1 - -_ 143.4 406.7 524 7 -- - -- -- 2 560.0 P-= 597.7 -- " 7".0--681,0 - - - - -127.0- -- -- - - 776.1 -- E. Sales proniotion 741.3 494 .2 247.1 0 0 0 0 0 0 0 

F. Facility expenses 

Main tenan~e 34.8 73.0 76.7 80.5 84.5 88.1 93.2 97.8 

Taxes 

102.7 

8.7 

107.9 

18.1 19.2 20.1 21.1 22.7 23.3 24.5 25.7 

Insurance - 8.7 18.3 27.0 - 19.2 20.1 21.1 - 22.2 23.3 24.5 25.7 27.0 

Total --- 52.2 109.5 115.0 Iz0e7 133.1 139.8 146.8 154.1- -==--==_- - 126.%-- - - 161.8 -- - -- ---.I-- 

G. Contingency expenses 0 105.8 452.7 605.4 647.8 693.2 741.7 793.6 849.1 908.6 

ti. Sales expense 0 264.4 1,131.6 1,513.6 1,619.5 1,732.9 1,854.2 1,984.0 2,122.9 2,271.5 

1. Cost of operations 793.5 7,559.6 20,211.7 24,901.2 26,064.0 27,309.4 28,642.7 30,069.3 31,594.8 33,225.6 

(B+C+D+E+F+G+H+L) 

.J. Taxable income (A-I) -793.5 -2,271.5 2,421.0 5,370.1 6,126.3 7,348.2 8,440.9 9,610.2 10,862.2 12,409.4 

K. Income tax (52% X J) -412.6 -1,181.2 1,258.9 2,792.5 3,289.7 3,821.0 4,389.3 4,997.3 5,648.4 6,452.9 

L. Depreciation 

Machinery 0 1,479.3 1,331.4 1,183.4 1,035.5 887.6 

0 

739.6 591.7 

Faciiitles - 443.8 295.9 -- 580.9 -.I--- 522.8 --_&7 406.6 148.5 ---90.4-- __ ----___ 232.4 174.2 116.2 Co tal 0 2 060 2 L

Q= _ --U~L--_ -1~2~ 1~ _-LL~~_.I -_-__.I 1s 3; 824.1 412 .0 ----- ---- _----I - -- -- - -(a~--- -_ M. After-tax profit (J-K) -380.9 -1,090.3 1,162.1 2,577.6 3,036.6 3,527.1 4,051.6 4,612.9 5,213.9 5,956.5 

N. Net earnings (M+I.) -389.9 969.8 3,016.3 4,225.8 4,478.8 4,763.2 -.0 5,831.9 6,368.6 - - -- - - - - - - -- - 

LiData may not equal totals because of rounding and truncating. 
per stud and by 190,080, 

puting the opexating cost 

e 16.--Estimated 

studs made in Arkans 

Raw material 

Particleboard res 

Resin catalyst 

Veneer adhesive 

Power and fuel 

FLOFJ5 AHD INTERNAL RATE 

The previous sections dealt with t'he estimated investment to build a CON-PLY 

ment they can expect from the cash proceeds or net earnings. 

sum. The $uture sum iacludes the original amount (present ;~iue) plus interest 
accumulated (return on Investment). The $100 is analogous to invest~ents -or cash 

outlays to build a factory, while the $106 is analogous to cash proceeds resulting 

from profitable operation. If we did not know the interest rate for the present 

value of $100 and future sum of $106 for a period of I year, we could find it by 

using trial interest rates until we foun 

investment . 

The process of computing the presm 

rate is referred to as discounting. Sn this study, the annual cash outlays (such 

as for investments) are considered as negative future sums and annual cash proceeds 

(such as net earnings from profitable operation) are considered as positive future 

sums. The object of the analysis is to find the compound interest or discount rate 

for 10 annual periods when the present value (at the beginning of the investment 

period or tine zero) of the cash outlays is just equal to the present value of the 

cash proceeds. This procedure is widely used for evaluating the economic feasibility of investments and is often referred to as a discounted cash flow analysis. 

Finding the appropriate compound interest or e is a trialprocess. 

e appropriate discount rate, a low inter 

h flows (outlays and proceeds) or futuce 

ue on the basis of the rate selected. If t ted net annual 

ive, then the present value of the cash proceeds is greater than 

the present value of the cash outlays for the 10 years of operation. In that case, 

a higher trial interest rate is selected and the procedure is repeated until a rate 

eds just equal the negcount rate 

ud factory during 

- 

------------ -Thousands of dollars- - - - - - - - - - - - - - 

0 344.7 + -344-7 X 1.000 -344 * 7 -344.7 

1 -6,108. 0.9 = -6,489.1 X .8696 = -5,642.7 -5,987.4 

2 -8,843.7 + 969.8 = -7,873.9 X .7561 = -5,953.8 -11,941.2 

''bra may not equal totals because of rounding and truncating. 

2 3 
The first column in table 17 shows the year or period of investment, Year 0 

represents the beginning of year 1, but the other numbers--1 through 10--represent 

year-end times. The next colum~ shows cash outlays for investmefit and is taken 

from table 2. The values are negative because they reprccent cash outlays, except 

for the value at year 10. %is value represents working capital. (cash, invenrorg, 

accounts receivable) that is recovered at the end of the in-~estment period. The 

recovered working capital is treated as a positive nontaxable cask flow, 

Column 3 is taken from the net earnings (table 15). If production operations 

are unprofitable, the net earnings will be negative, However, if the production 

operation is profitable, the net earnin.gs are positive and represent cash proceeds, 

Colum 4 is the sum of columns 2 and 3 and represents net annual cash flows. 

Colunm 5 lists the present-value factor for a 15 percent interest rate. This 

interest rate was selected because it represents a minimum rate of return on an 

investment. At rates of return Less tbaa 15 percent, a company might be better 

off to invest elsewhere. The values in column 4 re~resent future sums at the end 

of the year indicated. By multiplying the values in colum 4 by the present-value 

factor in column 5, the amount in column 1 is discounted (noired backward through 

time) to its present value (shown in column 6). For example, at the end of year 5, 

the net annual cash flow was $4,476,800 and the present value of annrsal. return was 

$2,226,700. In other words, if we had invested $2,226,700 at time zero at a cornpound interest rate of bS percent, we would 'have a future sun- cf <b,67R9800 at the 

end of 5 years. 

Column 7 shows the cumulative present values cf ztnnua!c~ii? E;i ws 117 ca7ur31 6, 

At a discount rate of 15 percent, the $17,OC.R,230 -Ire< T ,nt +~1cLd 1-e riaid \ i*~ 

8.44 years. Thus, the internai rate of rltiirp ~s 21 ,C9 .r ~rit. -r nther words, 

if we had used present-value factors :c.r a disccilnz PGL~ 7f 2: .['I9 percent, "Lhe rinvestment would have been paid back at i1.e erd iif L'-r ~PL-t i rtidra Fcr a discount 

rate of 21.09 percent, the negative pi-eceziz 1-a1uec ,i + zL - r cctlays would just 

equal the positive present values of the cash prrcee s I yt a* period, 

Internal rates of return were calculated for the three price levels of studs, 

but the operating cash flows and discounted cash flow analysis are shown only for 

studs priced at $130/N board feet at the mill. kites of return and related factors 

for the three price levels arc sumrized in table 18. 

Table 18.--Payback periods, internal rates of return, and break-even points 

for a CON-PLY factory selling studs at three price Levels (f,o,b. mill) 

Break-even 

iaives tmen t pe 

Years Percent ?i, hoard feet 

123 50 9.50 l7,16 67,085 
DISLGSS IOSi zQ!D CONCLUSIONS 

Under average conditions, a manufacturer should be able to obtain an internal 

rate of recum of 20 percent Or inore on ari investment in a new COM-PLY stud factory. However, much greater profit potential exists if existing facilities for 

-arruf,acturing particleboard and veneer are converted to the mnufacture of COM-YLY 

stuas, For such a conversion, investment would be less and positive annual cash 

flows would occur sooner than if a new plant were built. For a small investment 

in a stud-laminating operation, the return on the total investment would be much 

larger than shorn in this study, 

knversion of existing facilities to the manufacture of COM-PLY studs would 

also kelp alleviate this country's current excess capacity to produce particleboard, Because so rany ?articleboard plants have been built, many of them are 

providing a low internal race of return. A 100 percent conversion from particleboard to CON-PLY studs would not be zecessary. Even converting one-third of a 

factory's particleboard production tc COM-PLY studs should greatly improve its 

earning capacity. 

Consumer deinand for particleboard often peaks a year or two after the peak 

demand for lumber and plywood, primarily because denand for lumber and plywood is 

greatest during a housing boom. After a housing boom subsides, the need for lumber and plywood drops off, as it did late in 1973. Subsequently, construction of 

shopping centers and manufacture of furniture increase, both of which create a 

strong demand for particleboard. 

There are other financial benefits for a manufacturer who can produce COM-PLY 

lumber and particleboard in one fai-tory, He can shift production to the product 

in greatest demand. As a result, a facility thar can produce both products has 4 

the potential for larger positive cash flows over a longer period of time than one 

that produces particleboard alone. Under present practice, inany particleboard 

plants suffer heavy losses or are forced out of business during recessions. 

Potential manufacturers should carefully compare the manufacturing costs for 

COM-PLY studs (table 16) with those for sawn lumber studs, especially from the 

standpoint of fluctuating costs of raw materials. One of the greatest expenses 

in making conventional studs is the cost of wood. During periods of peak demand 

for lumber, the prices for stumpage increase, more so for softwoods than hardwoods. 

Because COM-PLY studs can be made from a mixture of hardwoods and softwoods, they 

have a distinct cost advantage in raw materials. Furthermore, wood represents a 

smaller percentage of the total cost of a COM-PLY stud than of a conventional stud. 

In COM-PLY studs, the cost for resin binder, catalyst, wax, and laminating adhesive 

is greater than for wood. These nonwood costs do not fluctuate greatly in unison 

with wood prices. 

In the future, we will mdoubtedly face the problem of getting 2 x 6's, 2 x S's, 

and 2 x 10% for lumber-franing from smaller logs than have been available in the 

past. This study shows that it is economically feasible to manufacture CON-PLY 

2 x 4's now, Therefore, the economic potential for making even larger COM-PLY 

lumber framing is highly favorable, 

This study was xade for the investment period from 1975 to 1985. As time 

passes, manufacturing costs will tend to favor COM-PLY studs over sawn lumber 

studs, halysis of financial feasibility for some later period--say 1980 to 1990-- 

should show even greater internal rates of return than those we found for the period 

from 1975 CG 1985. 
LITERATURE CITED 

U. S. Department o 

1977. The d 

C.