United SIt;rtes 

Department of 

bricufture 

Forest 

ic Feasibility 

In CosperaTion With 

United Sra-tes Manufacturing Department of 

Housing and 

Urban Development COM-PLY@ Floor Joi 

Gerald A. Koenigshof - Research Paper SE-241 

COM-PLY@ Report 26 
Economic Feasibility of Manufacturing 

COM-PLY@ Floor Joists 

Gerald A. Koenigshof, Research Scientist 

Forestry Sciences taboratory 

Athens, Georgia 

Cooperative Research by 

U.S. Department of Agriculture, Forest Service 

Southeastern Forest Experiment Station 

and 

U.S. Department of Housing add Urban Development 

Division of Energy, Building Technology 

and Standards 
Preface 

This report is one of a series on the possibilities of producing 

house framing and structural panels with particleboard cores and veneer 

facings, These CON-PLY or composite materials were designed to be used 

interchangeably with conventional lumber and plywood in housing, 

Research on structural framing was initially limited to CON-PLY studs 

but has now been extended to include larger members such as floor 

joists and roof truss framing, 

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

plywood and consequent rising prices, Both industry and government 

recognized that this was not a temporary problem and that long-range 

plans for better using the Nation's available forest resources would be 

necessary. 

The Forest 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 flakeboard and veneer as a way of 

using not only more of the tree stem, but also using less desirable 

trees and a greater variety of tree species than would be used for 

conventional wood products, The flakeboard which constitutes a large 

portion of COM-PLY studs and joists is made from flaked-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 Nation's timber supply, 

Research on composite wall and floor framing was performed by the 

Wood Products Research Unit, Southeas tern 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 demonstration houses, 

Included in this series will he 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 

Financial Feasibility Analysis .................. 2 

Process Used For Manufacture .................. 2 

General Requirements ...................... 4 

Investment ........................... 4 

Land ............................. 4 

Buildings ........................... 4 

Machinery and machinery foundations .............. 5 

Cash ............................. 5 

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

Accounts receivable ...................... 5 

Contingency and engineering .................. 5 

Flow of Materials ........................ 19 

Operating Costs .......................... 22 

Unit Materials Cost ....................... 22 

W~~d~~~aee~e~e~~~a~22 

Particleboard phenolic resin binder .............. 23 

Particleboardwax ....................... 23 

Laminatingadhesive ...................... 23 

Total materials cost ..................... 23 

Labor Cost ........................... 23 

Energy Cost ........................... 26 

Miscellaneous Production Costs ................. 27 

Depreciation Cost ........................ 27 

Annual Sales. Operating Cash Flow. and 

TotalManufacturingCost ....................... 

Net Cash Flow and Internal Rate of Return ............. 33 

Discussion and Conclusions .................... 36 
Pnves tments, production css ts , and 

probable returns for mn~f acture of 

COM-PLY floor joists are presented, 

The report shows that it is possible 

to obtain a 25 percent or greater 

after-tax internal r8te of return on 

the investment , 

Ke~osrds : Manufacturing cos "c s, lumber 

cost, economics sf lumber manufacture, 

cost analysis, floor framing costs, 

Cooperative research by the Pores t 

Service, U,S , hpartment of Agriculture, 

and the U,S, Department of Housing and 

Urban Development has led to development 

of a new composite lumber product, The 

new product, called COM-PLY, has patential for significantly increasing our 

supply of framing for building houses, 

Made with a structural sandwich 

cons truc tisn sf 1 ,5-in-thick flakeboard 

core placed between 0,25-in-thick layers 

of solid mod veneers (fig, I 1, GBM-PLY 

floor joists are intended to be direct 

substitutes f3r sawed Lumber now widely 

used for floor framing (fig , 2) , 

COM-PLY joists need to be priced 

esrnpeti%ive%y with sawed lumber so 

h~iiders will have incentive to purchase 

them, Fkoor jcist sizes considered for 

~anufacture in chis study are nominal 

2 x 8% and 2 x 101s, T%e only lengths 

consLdered are 3 2 ft Esr 2 x 8#s and 

14 ft for 2 x 10% since these sizes are 

the aost commonly used by builders; 

however, COM-PLY jclsts tag be manufactured in virtually any size that is 

practical tc handle and ship to the job 

site, 

Potential manufacturers want to know 

how much it will cast to manufacture 

~i~~re 4.--C5V-FbY iols+ used +3r frasilg 

fioors of hocsesMarietta, Georgia. 
COM-PLY joists, They also want to know 

if a COM-PLY lumber factory would be a 

profitable investment--one *at would 

have a greater rate of return on the 

investment than a sawmill, This report 

presents estimates on the amount of 

investment required to build a flakeboard, veneer, and joist-laminating 

factory; the annual sales and cost of 

manufacturing COM-PLY joists and the 

operating cash flow; and the annual net 

cash flow and internal rate of return, 

Any financial feasibility study is 

only as good as the assumptions upon 

which it is based. In this study, we 

assumed that the factory would he 

located in the South and would use 

southern pine and hardwoods. Cost 

assumptions are based on representative 

industry averages and therefore do not 

reflect values for any specific company. 

Much detail has been included in this 

report to provide guidelines for readers 

who want to make their own analysis, 

Results presented in the report do 

not guarantee that any firm can profitably manufacture COM-PLY joists-- 

prof itability depends on competent 

managerial skills, market demand, production efficiency, and other business 

factors. The results strongly indicate 

that it is economically feasible to 

manufacture COM-PLY joists . Although a 

specific firm's price, cost assumptions, 

and quantity may vary from those assumed 

in this report, minor variances would 

not affect the overall conclusions 

reported, Companies contemplating the 

manufacture of COM-PLY joists should 

substitute their own local cost estimates in a similar analysis to check economic feasibility for their particular 

location, 

Financial Feasibility Analysis 

Process Used for Manufacture 

COM-PLY joists are 1-1 /2 x 7-1 /4 or 

1-112 x 9-1/4 in. in cross section and 

serve as substitutes for 2 x 8 or 2 x 10 

sawed joists in framing floors of houses. 

Unpublished research by Koenigshof and 

J, E, miff (Athens, Ga. ) showed that by 

using flakes in the coreboard oriented 

lengthwise of the COM-PLY joist greatly 

increased joist strength, stiffness, and 

fire resistance, Approximately 65 

percent of the wood particles in the 

core should be oriented flakes, The 

remaining 35 percent of the particles 

can have a geometry like that used in 

conventional particleboard underlayments 

(typically, ring-flaked planer shavings). 

The flakes are made by flaking veneer 

peeler cores or other roundwood in a 

drum-type flaker, The flaker knives are 

set to cut ribbons of wood 1-1/4 to 

3-114 in. wide and 0.02 to 0,03 in. 

thick, The ribbons of wood are broken 

into flakes of an average width of 

0.25 - + 0.1 25 in, during the flaking 

process, The result will be a flake 

that on the average will be 1/4 in. 

wide, 2-1/4 in, long, and 1/40 in, 

thick. Ribbons of wood from the flaker 

can be passed through a hammermill with 

a large-size screen to break the ribbon 

into flakes 1/4 in, wide, Wider flakes 

cannot be used because they tend to curl 

and will not be uniformly coated with 

resin during blending. However, length 

is not critical as long as the lengthto-width ratio results in effective 

orientation, 

These specifications are typical for 

mechanically oriented flakeboard cores, 

However, research by T, M, Maloney at 

Washington State University, Pullman, 

Wash,, and by Thomas E, Peters with 

Morrison-Knudsen, Inc, , Boise, Idaho, 

shows that f lakeboards made with 

ring-flaked particles and Douglas-fir 

planer shavings have strength and stiffness properties approaching flakeboard 

with drum-cut flakes when the particles 

are electrically oriented, Therefore, 

quite a wide variety of flakes can be 

used in COM-PLY joists provided that the 

proper orientation equipment is used to 

achieve effective particle alignment, 

Fine particles that are considered 

dust or flour and pass through a 30- 

to 40-mesh screen should be removed as 

con~pletely as possible from the wood 

supply. Fine particles retained on a 

20- to 40-mesh screen, preferably a 12 

to 14 mesh, can make up 15 to 20 percent 

of the wood in the particleboard, Bark 

particles can constitute up to 5 percent 

for fiberous barks such as yellow-poplar, 

Moisture content of the wood particles 

before blending should not exceed 6 

percent of the ovendry weight of the wood, 
TO keep the weight of the joist 

reasonably low, the species of wood can 

be 50 to 100 percent medium-to-dense 

softwoods such as southern pine or 

~ougfas-f ir; 35 to 50 percent low-tomedium dense hardwoods such as yellowpoplar, sweetgum, or sycamore; and, not 

more than 15 percent dense hardwoods 

such as oak, hickory, or beech, Any 

combination of species can be used 

provided that the joist will pass the 

Perf omance Standards ' for COM-PLY floor 

joist, COM-PLY joist made with veneers 

of oak, sweetgum, yellow-poplar, 

southern pine, and combinations of these 

woods have been fabricated and tested 

for stvength and stiffness performance 

and the results were satisfactory for 

use, The weighted average dry density 

of the wood sup ly used in this study 

was 28 -82 ib/f ty and the specific 

gravity was 0.462, 

The flakeboard core can have a 

specific gravity of 0,6 + 5 percent or 

density of 37.44 + 5 percent lb/f t3. 

The hoard can be Grnogenous or three 

layered, If homogenous, the resin content will be 6 percent phenolic solids 

based on the ovendry weight of the wood 

and the wax content, 0,5 percent solids, 

If three layered, the resin content will 

be 6.5 percent phenolic solids in the 

face layers and 5,5 percent in the inner 

layer; the wax content, 0.6 percent 

solids in the face layers and 0.4 percent in the inner layer, For threelayered board, most of the wood fines 

can be in the face layers, constituting 

50 percent of the board thickness. The 

three-layered board is preferable to the 

homogenous board, 

The internal bond of the board should 

be more than 100 lb/in2, Thickness 

swelling cannot exceed 8 percent after a 

24-hour water soak; wax content can be 

increased to decrease thickness swelling, Phenolic resin must be catalyzed 

Duff, John E,; Koenlgshof, Gerald A,; 

Hittenberg, Dick C, Performance standards for COM-PLY floor joists, Res. 

Pap, SE-192, COM-PLY Rep, 14. Asheville, 

NC: U,S. Department of Agr icu lture, 

Forest Service, Southeastern Forest 

Experiment Station and Wash ington, DC: 

U,S, Department of Housing and Urban 

Development; 1978, 17 p. 

to cure in 10 to 11 minutes when the 

platen temperature is 400° F for boards 

1 -1/2 in, thick, Resin in the face 

layers need not be catalyzed, 

The flakeboard core is made on a 

standard multiplaten hot-press typically 

used to make commercial particleboard, 

The processes of manufacturing particleboard are well known and will not be 

repeated here. However, the press line 

must accommodate the thick mat required 

for 1-1 /2-in-thick board. The daylight 

opening of the press must be large 

enough for the thick board; a prepress 

to reduce mat thickness is also essential, 

To produce oriented flakes in the 

core, the forming machine should have 

rnechanical- or electrical-flake orientating capability. The flakes should be 

oriented with their lengthwise dimension 

parallel to the lengthwise dimension of 

the flakehoard, The mat can be pressed 

to a board thickness of 1-1/2 in, by 

using stops or other means of controlling 

thickness on the particleboard press, 

The board surfaces should not be sanded 

after manufacture, 

Veneer, 1-1/4 in, thick, is rotarycut from southern pine, yellow-poplar, 

oak, and mixed hardwood peeler blocks 

and dried to an average of 3 percent 

moisture content, Other thicknesses of 

veneer or another species mix can be 

used by manufacturers if they find them 

more practical for their particular use, 

There was no unreasonable amount of spinout, splitout, or other veneer peeling 

difficulties experienced in production 

facilities that supplied 1/4-in-thick 

southern pine, yellow-poplar, sweetgum, 

and oak veneer to the Athens laboratory 

for technical research projects. Dense 

hardwood such as oak or hickory is 

assumed to constitute not more than 1 5 

percent of the veneer volume, The 

choice of 15 percent was arbitrary, and 

the intent was to keep the weight of the 

product reasonably low but to still use 

some of the higher density woods that 

are in relatively abundant supply, 

For this study, the veneer was 

clipped into sheets 2 to 2-1/2 it wide 

by 8 f t long, then glued into panels on 

a standard plywood hot-press or on a 

particleboard press. For making 2 x 10 

joists, the panels are five veneers 
thick; for 2 x 8 joists, four veneers 

thick, The panels are then scarfed or 

finger-jointed on each end and glued 

together to form a continuous ribbon of 

paralle l-laminated veneer (PLV) lumber, 

which is C~OSSCU~ into panel lengths 

equal to the length of lumber being 

made, 

The veneers in PLV lumber are glued 

together with a 2henslic adhesive identical "co &&at :~sed for making plywood, 

Adhesive is applied at a. spread rate of 

50 ih/M frr2 of glueline. The glued 

panels are ripped into pieces 1-1 /2 in, 

wide, called cords, The cords are beveled on two corners during ripping by a 

V-shaped cutterhead to provide easededge lumber, For this study, these 

cords were then glued to the edge of a 

flakeboard core in a lumber edge bonding 

machine with radio-f requency (RF) 

heating to form a piece of GOM-PLY 

lumber, The cords cut from the PLV 

lumber are glued to the particleboard 

cores with phenol-resorcinol adhesive at 

a spread rate oE 90 ib/M ft2 of glueline, Glue should he spread on both mat 

surfaces to obtain the maximum quality 

bond. 

settling pond, paving, fencing, rail 

spur, water supply, fire protection, 

sanitary facilities, and outside lighting, would cost $987,000 for Case 1 and 

$591,000 for Case 19: 

- Cost 

Land $! $6 ,CQO/azre 

Sk~mixg and grading 

Di-aiqage and culverts 

Seteliqg ooad 

RockEilL i@ $~/~d:) 

Asphalt pavrng (@ S, hO!f t '1 

Crushed. rock (6 S7iyd?j 

Fencing (9 Sl61ft) 

RR spur track i@ $3O/ft! 

i2-in, water service 

12-in, underground sprinkler loop, 

hydrants, and hose statrons 

Domestic water service 

Sanitary system 

Effluent treatment 

Outside lighting 

Total 

Buildings, The amount of building 

space required is: 

Type of building Square footage 

Case L Case I1 

Boilerhouse 

Refining and drying 

Flakeboard production 

PLV green end 

Veneer and PLV production 

Laminating and finished 

warehouse 

Chipper building 

Electrical and hydraulic 

rooms 

In-plant shops, lunchrooms, 

and offices 

General Requirements 

This economic analysis assumes that 

construction of two COM-PLY factories 

was begun in 1979 at prevailing prices, 

TWO factory sizes are considered: Case 

L is a factory that produces 169,712,000 

board feet (fbm) per year and Case XI, 

91,282,000 fbrn per year, For both cases 

it is assumed that 45 percent of production is 2 x 8-1 2 joists and 55 percent 

is 2 x 10-14 joists, The factories are 

assumed to operate 250 days per year, 

three shifts per day at an efficiency of 

85 percent, Approximately 108 days 

would be for 2 x 8 production and 142 

days for 2 x 18 production, 

Total 325,200 195,120 

Costs for a1 1 buildings (manufacturing 

plus off ice space) including slabs, 

footings, lighting, heating, sprinklers, 

and wall finishing are $4,260,000 for 

Case I and $2,649,800 for Case TI: 

un~t 

- Iterr cost/ftZ case I Case 11 

Prefab steel bazldlngs 

(insulated and erected) $7.00 

Slabs and footings 3.00 7: ~iqhtiiig .RO 

Heating .70 

Inside sprinklers .1?0 

Office and labs 

:partitions an2 fznishingl -- General office 

(6,000 fr2 outside of plant) -- 

Land, The site selected for this 

analysis is located in the south-central 

United States and consists of 50 acres 

for Case I and 30 acres for Case 11, 

Raw land is assumed to cost $6,000 per 

acre, The developed site, including 

amenities such as grading, drainage, 

EC, 000 
mchinery and machinery foundations, 

Table 7 provides a detailed list of 

machinery, machinery ins tallation, and 

machinery delivery cost , Nachinery cost 

for Case I is $29,652,100 and for Case 

XI, $19,658,700. The cost of machinery 

foun3ations is shown in table 2. 

Gash , In this analysis, we assume that 

the equivalent of 2 months' payroll is 

sufficient cash to meet the payroll, 

provide ptty cash, and otherwise meet 

cash needs to operate the business. In 

a later section, we show that the annual 

labor cost in 1979 would be $3,182,500 

for Case I and $2,197,500 for Case I1 if 

the plant were operating at full capacity. Thus, cash required was assumed 

to be $532,083 for Case I and $366,250 

for Case 11. 

Inventory. Investment is required for 

raw materials, for materials being processed, and for finished products awaiting shipment, In this study, onetwelfth of the annual cost of raw 

materials for a factory operating at 

full capacity was assumed to be sufficient to cover all requirements for 

inventory investment, It will be shown 

that the total annual cost of raw 

materials for Case I is $15,258,714 and 

$8,396,788 for Case 11, Theref ore, the 

investment required for inventory is 

$1,271,560 for Case I and $699,732 for 

Case 11. 

Accounts receivable. A considerable 

investment is required to cover sales to 

customers who do not pay immediately 

upon delivery. These accounts receivable may typically be paid in 10 to 60 

days, The average collection period was 

assumed to be 40 days, Investment to 

cover accounts receivable was considered 

to be 40 days of sales. Sales will vary 

with the unit price received for products and the quantity produced each 

year, 

In 1979 the average price for No, 2 

southern pine KD 2 x 8-12's was $282 per 

thousand board feet (M bm) and for 

2 x 10-148s, $352/M bmO2 However, these 

Evans, Davld S,, ed, 1979 Random 

l engths yearbook, Eugene, OR: Random 

Lengths Publfcations, Inc,; 1979, 186 p, 

prices were above the long-term trend 

prices because of strong demand for 

lumber in housing during 1979, The 

trend prices are $270/M bm for 2 x 8-1 2's 

and $317/M brn for 2 x 10-14's. Trend 

prices are used in economic studies to 

strike an average for an investment 

period. The use of current prices that 

are above the trend at the time of 

making an analysis would be misleading 

because they would be artificially high, 

and a higher return on investment would 

be shown than is actually achievable; 

the use of current prices that are below 

the trend would show a lower return on 

the investment than is actual, and the 

investment would be rejected when it 

would be quite feasible, 

Based on trend prices, the sales for 

this study are: 

Annual M txn 

Joist type production ~rice/El bm Annual sales 

CASE I 

2 x 8-12 76,370.4 x $270 = $20,620,000 

2x10-14 93,341.6 x 317 = 29,589,300 

Total $50,209,300 

CASE I1 

2 x 8-12 41,076.9 x $270 = $11,090,750 

2 x 10-14 50,205.0 x 317 = 15,915,000 

Total $27,005,750 

The accounts receivable working capital 

for 40 days of sales is $5,502,387 for 

Case I and $2,959,534 for Case 11, 

Contingency and Engineering, A 

consulting engineering firm (Columbia 

Engineering, mgene, Oreg, ) estimated 

costs at $2 million for Case I and 

$1,500,000 for Case 11, Investment 

contingency in the order of 10 percent 

of the site, building, machinery, and 

foundation was used by the consultants, 

The amount is $3,578,000 for Case I and 

$2,348,000 for Case 11, Total engineering and contingency investment is 

$5,578,000 for Case I and $3,848,000 for 

Case 11. 

The investment costs and timing of 

investments are shown in table 3, The 

total investment for Case I is 

$48,612,500 and for Case 11, 

$31,355,500, 
Table 1 .--Machinery and machinery cost for a CON-PLY joist factory 

Cost 

tfachinery or associated item 

Case I Case I1 

Dollars 

LOG PROCESSIWG EQUIPIGNT 

Log storage and handling (mobile equipment) 

Log lift machines 251,000 251,000 

Block lift machines 

Log debarking and bucking 

Log decks 

Hydraulic loaders 

Log conveyors 

Crook saws 

Log conveyors 

Barker inf eed 

Barkers 

Log conveyor (barker out feed) 

Log conveyors (to sorting decks) 

Log sorting deck 

Transfer decks 

Log conveyors 

Block saws 

Rlock conveyor (at saws) 

Block pockets (residual) 

Residual block transfer 

Block conveyor 

81ock conveyor with kickers 

Rlock pockets 

Continued 
Table 1. --Machinery and machinery cost for a COM-PLY joist f ac tory--Cont inued 

Cost 

Machinery or associated item 

Case I Case I1 

Chipping and chip handling 

Residual log conveyor 

Residual log transfer 

Chipper feed conveyor 

8 4-in. whole-log chipper 

Chip screen 

Chipper discharge conveyor 

Chi? conveyor to surge bin 

Chip surge bin 

HP pneumatic system (chips to storage) 

Overs and fines conveyor (to hog fuel) 

Lily pad conveyor and saws 

Lily pad conveyors (gathering) 

Lily pad chipper feed conveyor 

Lily pad chipper outfeed 

Metal detector 

Lily pad chipper 

Dollars 

Waste conveyors and hog 

Waste conveyor under #1 barker 

Waste conveyor under #2 barker 

Waste conveyor under /I1 transfer 

Waste conveyor under #2 transfer 

Waste conveyor under #1 sawline 

Waste conveyor under 112 sawline 

Waste gathering cross conveyor 

Hog feed conveyor 

Earner hog (jj.55) 

Hog discharge conveyor 

YP pneumatic system to fuel pile 

?:eta1 detector 

Continued 
Table 1.--Machinery and machinery cost for a COE-PLY joist factory--Continue& 

Cost 

Machinery or associated item 

Case 1 Case 11 

Steaming vats 

Control and electrical rooms, 

platforms, walkb~ays, etc. 

VENEER AND PLV EQUIPmFIT 

Veneer drying 

Veneer dryers 

Dryer feeders 

Dryer out feed 

1 -> 

Veneer sorting table 

Moisture detectors 

Creen-veneer product ion 

Log decks 

Lathe chargers 

Lathes (#277) 

Trash gate 

Clipper inf eed table 

Veneer chain 

Lathe and tray drives 

Veneer tray (short coupled) 

1 -> 

Trash return 

Core conveyor and pockets 

Clippers 

Clipper controls 

Automatic veneer stackers 

Chipper feed conveyor 

Veneer chipper 

Continued 
Table 1,--Machinery and machinery cost for a COM-PLY joist faetory--Continued 

Cost 

Machinery or associated item 

Case I Case 11 

Dollars 

PLV production 

tayup line and stack conveyors 

Glue kitchen 

Prepress 

Press Loaders 

~ot-pressa (6 ft x 8 ft -- 20 openir?qs) ,-> 950,000 525,000 

press unloaders _I 

Panel sawing and handling, 

chipping waste system, etc, 

panel saws 

Panel handling 

Dry waste hog 

Rog feed conveyor 

LP hog pneumatic system 

Chipper discharge conveyor 

Chip metering bin 

Chip screen 

WP pneumatic system to chip 

Fines and overs to hog fuel 

Veneer carts 

~esin bulk storage tanks 

Continued 
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P able 1. --Machinery and machinery cost for a COM-PLY joist factory--Cont inued 

Cost 

Machinery or associated item 

Case I Case 11 

Dollars 

Mat erial classification and blending 

Fire dump conveyors 

Classifying screens 

Overs conveyor to hammermill 

Emermill 

Conveyor to accepts conveyor 

F ines gathering conveyor 

HP air system (fines to fuel silo) 

Flake conveyor to dry storage bin 

Dry flake storage bin 

Conveyors to blender metering bins 

Blender metering bins 

Electromagnets 

Weigh belts 

Weigh scales and instrumentation 

Blenders 

Resin and wax mixing system, instrumentat ion, pumps, and piping 

Resin and wax bulk storage tanks 

Conveyors-blenders to forming 

Distribution conveyors over forming 

Platforms , walkways, and structural steel 30,000 25,000 

1,048,600 804 ,000 

Continued 
Table I*--Machinery and machinery cost for a COM-PLY joist factory--Continued 

Gos t 

Machinery or associated item 

Flakeboard production line 

Forming machine and conveyor 

~ressb 

Loader and unloader 

Gaul system, weight scales, board 

separator, and ekectrics 

Cleanup screw 

Mat saw pneumatics 

Reject hopper with outfeed 

Reject conveyor to bin 

Reject bin with outfeed 

Press exhaust hood and fans 

Press pit cleanup system 

Bypass stacker, feeder, skin and trim 

saws (including transfers and trim 

breakers ) 

Stacker and outfeed rolls 

Trim conveyors 

Trim hog 

Hog trim blower (to fuel) 

Saw pneumatic system 

Support steel, walkways, etc , 

Press stops 

Aluminum cauls 

Saw blades 

Mis~ellaneou~ chutes and hoppers 

Continued 
Table 1,--Machinery and machinery cost for a COM-PLY joist factory--Continued 

Cost 

Machinery or associated item 

Case I Case I1 

Dollars 

FINGER JOINTING AND MIMATING 

Finger jointing, gluing machinery, and tooling 

PLV ripsaw 

 lake board ripsaw 

panel feeders 

~es idual f lakeboard gluer 

JO~ st lamina tors 

~ngineering and research and development 

Arbors and tooling (PLV) 

Arbors and tooling (f lakeboard) 

Platerial handling conveyors 

of fbearing and stacking 

Waste conveyors 

Waste hog 

LP waste pneumatic system 

HP pneumatic relay system 

Glue kitchen 

Resin storage tanks 

incl , above incl. above 

12,000 12,000 

6,000 6,000 

80,000 75,000 

40,000 25,000 

10,000 10,000 

20.000 15.000 

MISCELLANEOUS EQUIPMENT 

Boiler and fuel handling equipment 

Fuel stacking and reclaiming 

Fuel conveyor sys tem 

250 lb/in2 boiler (70,000 lb; 50,000 lb) 

Air sys terns 

Control 

Pumps and piping 

Continued 
Table 1 ,--Machinery and machinery cost for a COM-PLY joist factory--Continued 

Cost 

Machinery or associated item 

Case I Case I1 

Dollars 

Auxiliary equipment 

Air compressors 

Air receivers 

Air dryers (instruments) 

Forklifts and loaders 

Propane tanks 

Air-conditioning 

Plumbing fixtures 

Cooling tower 

Condensate pumps and tanks 

Truck scales 

Knif e-grinding and savf iling equipment 

Machine shop 

Lab equipment 

Maintenance equipment and small tools 

Spare parts 

Yard truck and sweeper 

50,000 

10,000 

8,000 

150,000 

Lease 

30,000 

8,000 

40,000 

90,000 

16,000 

35,000 

25,000 

30,000 

80,000 

60,000 

34 .ooo 

Electrical equipment 

Log processing 

Block conditioning 

Veneer, PLV manufacturing 

Chip and hog fuel receiving and storage 

Refining and drying 

Classification and blending 

Flakeboard production 

Finger jointing and laminating 

Boiler and fuel handling 

Continued 
Table 1 .--Xachinerp and machinery cost for a CBM-PLY joist factory--Cont inued 

Cost 

Machinery or associated item 

Case I Case I1 

Dollars 

Piping equipment 

Omer-supplied major valves, pumps, 

and instrumentation 

Pollution abatement 

Log debarking and bucking 

Block conditioning 

Veneer and PLV production 

Chip and hog fuel receiving and storage 

Refining and drying 

Classification and blending 

Flakeboard production 

Finger jointing and laminating 

Boiler and fuel handling 

EQUIPmNT INSTALLATION 

Mechanical 

Barking and bucking center 340,000 

Block conditioning (incl. w/equipment ) 0 

Veneer and PLV manufacturing 427,000 

Chip and hog fuel receiving and storage 28,500 

Refining and drying 290,000 

Classification and blending 108,000 

Flakeboard product ion line 529,000 

Finger jointing and laminating 364,000 

Boiler and fuel handling 

Continued 
Table 1,--Machinery and machinery cost for a CON-PLY joist factory--Continued 

Cost 

Machinery or associated item 

Case I Case I1 

Piping 

Barking and bucking center 

Block conditioning 

Veneer and PLV manufacturing 

Chip and hog fuel receiving and storage 

~efining and drying 

Classification and blending 

Flakeboard production line 

Finger jointing and laminating 

Boiler 

Electrical 

Barking and bucking center 

Block conditioning 

Veneer and PLV manufacturing 

Chip and hog fuel receiving and storage 

Refining and drying 

Classification and blending 

Flakeboard production line 

Finger jointing and laminating 

Boiler and fuel handling 

Freight 

Total 

Dollars 

aCase 1--2 presses; Case 11--1 press, 

b~lakeboard press for: Case I, normal 5-1/2 ft x 24-1/2 ft--20 openings; 

Case 11, normal 5-l/2 ft x 16-1/2 ft--16 openings, 
Table 2.--Type of machinery foundation and foundation costs for Case I 

and Case I1 

Cost 

Foundation item 

Case I Case I1 

Dollars 

Log infeed decks 

Log conveyors, debarker, and cutoff saws 

Transfer decks 

Block pockets and aprons 

B lock conditioning (incl . w/equipment ) 

Lathe infeed deck and apron 

Charger, lathe, core transfer and pockets 

Veneer chipper and feed conveyor foundation, 

pit and trench 

Clipper and tray area 

PLV press pits 

Veneer dryers 

Misc. trenches, pits and foundations, 

pneumatic systems, screens, et c. 

Truck dump, hopper, ramp, footings, and pit 

Radial stacker and outside chip storage slab 

Ring flaker and dryer feedbins 

Conveyors from truck dump 

Ring and roundwood flakers 

Dryers, with burner and blowers 

Boiler and fuel storage and handling 

Roundwood feed conveyors to flakers 

Dryer fuel preparation and handling 

Dry flake bins and related conveyors 

Blender metering bins and related conveyors 

Resin and wax tanks 

Press pit and hydraulic tank area 

Air-compressor foundations, trenches, 

and miscellaneous foundations 

Finger jointing, ripsaw, laminators, 

feeders, stackers, and miscellaneous 

conveyor foundations 

Substations, sumps, and yard trenches 

Misc. blower footings, tower footings, etc. 

Total 
Table 3.--Net investment required for the first 3 years for Case I and Case I1 

Beginning of End of End of End of 

first year first year second year Third year Tot a1 

Investment Case I Case I1 Case I Case I1 Case I Case I1 Case I Case I1 Case I Case I1 

Land 

Buildings 

Foundat ions 

Machinery 

Cash 

Inventory 

Accounts 

receivable 

Contingency and 

engineering 

Net investment 
Tfie flow of materials through a 

factory is important to know because 

this determines the number and size of 

machines, which in turn determines 

machinery costs, The quantities of 

materials purchased can be determined 

from a materials flow analysis that 

accounts for waste, which is needed to 

determine operating costs, The flow of 

materials is useful in determining the 

energy required to operate the factory 

and the fuel recovered from combustible 

waste. The materials flow analysis 

provides a balance of materials flowing 

into and out of the factory as well as 

in and out of each operation, Such 

materials balance analysis is essential 

for determining the cost of wood and the 

product yields, However, materials 

balance diagrams are highly complex and 

there are many possible variations in a 

balance of flow because there are many 

combinations of materials that can be 

used, such as various species, whole 

tree vs. saw logs, and green vs. dry 

residues purchased, Waste factors and 

veneer yields vary considerably in 

relation to the type of raw wood supply, 

The flow of materials also varies, 

depending upon the type of product being 

made. 

A computer program was used to compute 

the flow of materials through the 

COM-PLY factories used in this report, 

The detailed results of the materials 

flow analysis are too extensive to 

include in this Paper, so only a summary 

is presented and only for 100 percent 

manufacture of 2 x 8-1 2 joists for Case 

11. Readers who want the in-depth 

report on waste factors, product yields, 

and variations in materials flow that 

were studied can obtain it from the 

author, 

For Case I, the particleboard press 

had a nominal platen size of 6 ft wide 

by 25 ft long, of which 72 in, of width 

by 300 in, of length were usable for 

untrimmed width of the mat, The press 

had 20 openings, For Case 11, the 

nominal platen size was 6 ft wide by 

17 f t long, of which 72 in, of width and 

204 inches of length were usable for 

untrimmed width of the mat. The press 

had 16 openings, For both cases, there 

were 12 pieces of core material for 

2 x 8 joists ripped from each flakeboard 

produced, For both cases, the presses 

cycled 4,4 times per hour or every 13,64 

minutes, At the rate of 4,4 cycles per 

hour, Case I production would be 7,805 

fbm per cycle and 34,342 fbrn per hour 

and Case 11 would be 4,199 fbm per cycle 

and 18,476 fbrn per hour. For 250 days 

at an efficiency rate of 85 percent, the 

annual production for Case I is 

175,146,000 fbm and 94,226,500 fbm for 

Case 11, if only 2 x 8's are produced, 

The flow of materials occurs in three 

production lines, One line produces the 

veneer portion of the joists, one 

produces the flakeboard cores for the 

joists, and one laminates the veneer 

cords to the flakeboard cores, There is 

some waste generated from each 

production line that flows to the boiler 

for fuel, but some manufacturing residue 

is recycled and used for feedstock for 

the f lakeboard operation, Total waste 

bark, wood, and f lakeboard residues 

ranged between 607 and 633 lb/M bm of 

lumber produced. This waste is about 25 

percent bark and was used for boiler 

fuel, Dry-wood volumes are assumed to 

be 88 percent of their corresponding 

green-wood volumes, 

The flow of veneer is based largely on 

information obtained from studies by 

~c~lister~ to determine the grade and 

yield of veneer from southern pine and 

various hardwoods, The following tabulation summarizes some of the important 

ratios taken from PlcAlister 's studies 

which are used to compute wood flow in 

the veneer line. 

Ratios Value 

Linear feet of green peeler block to cubic 

. feet of green peeler block 1 81 

Linear feet of green tree to cubic feet 

of green tree 2.61 

3~c~lister, Robert H,; Taras, M, A. 

Yield of southern pine suitable for 

composite lumber and panels, Res, Pap, 

SE-180, COM-PLY Rep, 12, Ashevli le, NC: 

U,S, Department of Agr f cu I ture, Forest 

Service, Southeastern Forest Experiment 

Station and Washington, DC: U,S, 

Department of Housing and Urban Development; 1978, 15 p, 
Green cubic feet of peeler block to dry 

cubic feet of veneer peeled 2.95 

Dry cubic feet of tree to dry cubic feet 

of peeler block 1.21 

The volume of veneer required for the 

end product is a fixed and a known 

amount, A greater volume of veneer must 

be peeled or dried to account for waste 

in various manufacturing operations, To 

determine the amount of timber in peelerblock form required to operate the 

factory, the peeled and dried veneer 

volume is multiplied by 2.95 to get the 

green-block volume. This is an example 

of how the ratios were used in making a 

materials flow analysis. 

Table 4 lists the flow of wood through 

the veneer production line, An important amount shown in table 4 is the 

quantity of green tree-length timber 

( 71 ,3 ft3 ) required to produce a 

thousand board feet of COM-PLY joists. 

The green tree-length timber varies in 

size from 10 to 22 in, in diameter at 

breast height (dabah. ) , and the number 

of trees in each size class is typical 

for natural pine or mixed hardwood 

stands (see footnote 3) , Trees were 

assumed to be cut from a 1-ft-high stump 

and had top diameters of 3 to 4 in, inside the bark, The timber is assumed to 

be No, 2 saw-log quality, so there is 

nothing special ahout the type timber 

purchases, Note that the dry volume of 

veneer resulting in cords for joists is 

about one-fourth of the dry-tree volume, 

For this example there should be approximately 232 blocks peeled into veneer at 

the lathe each hour, 

Table 5 shows amounts of wood and 

flakeboard flowing through the 

flakeboard manufacturing line, The 

greatest quantity of wood for the 

flakeboard comes from tree tops and 

veneer-peeling residues, In this 

analysis, a small amount of 'bark was 

allowed in the product, The whole tree 

is converted into COM-PLY joists except 

for some bark and fine residues that are 

burned in the boiler, In this example, 

478 lb of green wood or 315 lb of dry 

wood are flowing into the boiler for 

each thousand board feet of joists 

produced. However, the materials 

balance analysis shows that additional 

wood must be purchased from other 

sources. Table 5 shows that 886 lb of 

green roundwood or 424 bone-dry lb of 

mill residues are required in addition 

to the green tree-length timber 

(table 4) for a balanced flow, 

The total feedstock flowing into the 

flakeboard line for each thousand board 

feet of production is 3,626 lb of green 

wood. Of this, 19 ltn are wasted in 

preparing flakes, which leaves 3,607 lb 

for the screening operation, Along the 

flakeboard line, chemicals are added and 

waste is lost to the boiler or recycled 

as feedstock. Water with chemicals is 

added but is later lost in waste 

materials and as vapor during the 

flake-drying and board-pressing 

operations, The apparent increase in 

the flow of material through the forming 

operation is due to mat that is recycled 

through the forming stage. 

Table 4.-- Plow of wood through the veneer production line for Case I1 

Operation Type wood low/^ bm of joist 

Cubic feet Pounds 

Log processing Green tree-length timbera 71.3 3780.2 

Log processing Dry tree-length timbera 62.8 1808,7 

Veneer peeling Green peeler blocks a 58.9 3124.2 

Veneer drying Dry veneer 20.0 575.8 

Laminate veneer panels Veneer panels 19.6 564.4b 

Cut panels into cords Veneer cords 16.1 464.2 

aDoes not include bark. 

b~he weight of the plywood glue used to laminate veneer is excluded. 
Table 5,--Flow of wood and flakeboard through the flakeboard line for Case 11 

~low/l$ b of ioist 

Operat ion Type I?ood Undried weight Dried weight 

P ound s 

Flake preparation 

Screening 

Drying 

Blending 

Forming a 

Pressing 

Sawing into cores 

Cores available 

for laminat ing 

Tree tops 

Peeling residues 

Tree bark 

Veneer residues 

Flakeboard residues 

Purchased residues 

Total feedstock 

Wood flakes 

Wood flakes 

Wood flakes, resin, and wax 

Wood flakes, resin, and wax 

Flakeboard 

Flakeboard 

Flakeboard 

a~bout 10 percent of the mat is recycled in the forming stage, which accounts 

for an apparent increase in materlals flow in this operation. 

Table 6 shows the flow of materials 

in pounds that occurs in the final 

laminating stage, For analysis 3 

percent of the material was assumed to 

be rejected because of poor quality and 

breakage, There are 62.5 pieces of 

2 x 8-1 2 joists for every thousand board 

feet produced, and, for this example, 

there is 18,4758 M bm feet of 2 x 8's 

produced per hour or 1,155 joists to be 

laminated each hour, Each joist is 

composed of three pieces (two cords and 

one core), Therefore, there are 3,465 

pieces of material to be handled each 

hour in a 2 x 8-12 laminating operation, 

The flow of materials on a per-thousandboard-foot basis does not vary much from 

the amounts shown in tables 4 and 5 for 

lumber sizes 2 x 4 to 2 x 10 for veneer 

or flakeboard production, However, if 

saw logs are fed into the system instead 

of tree-length timber, it will require 

purchasing a greater amount of flakeable 

wood (other than saw logs ) for feedstock 

to obtain materials balance, This other 

purchased wood can be green or dry, or 

poor or excellent quality with regard to 

flaking properties. The amount of water 

to be removed during flake drying and 

the fuel value of waste is af f ected by 

the moisture content of the wood 

purchased. The quality of purchased 

wood will affect the amount of wood to 

be flaked, screened, and burned in the 

boiler, Therefore, the species, type, 

moisture content, and quality of wood 

used to make COM-PLY joists can result 

Table 6.--Flow of materials leaving the factory 

after laminatinga 

F~OW/Y hn of joist 

Operation and material Undried Dried 

weight weight 

Pounds 

Laminating cords to cores 

Veneer laminates 474 450 

Flakeboard cares 1,592 1,536 

Laminating adhesive 

(veneer to veneer) 28 12 

Laminating adhesive 

(veneer to core) 17 7 

a3 percent of the final product was assumed 

+o be rejected because of breakage or poor 

aual ity. To obtain the flow of materiels Into 

the iamina+ing fine, divide the quantities shown 

by 0.97. 
in substantial variations in flow of 

materials from the amounts shown in 

tables 4 and 5, 

Operating Costs 

Operating costs are major determinants 

of annual net earnings or cash proceeds 

from the investment, In this study, 

based on operating costs at 1979 prices, 

the assumption is that the factory 

operated 5 days per week and 50 weeks 

per year, Out of each 24-hour day, it 

is assumed that there are 20,4 hours of 

useful work, Efficiency is thus 85 

percent or 5,100 hours of production at 

full machine rate per year. The veneer 

and flakehoard lines should operate at a 

higher efficiency because essentially 

only a single item is made on those 

lines and the setup and startup times 

are small. 

Unit Materials Cost 

Wood. For wood requirements, 

manufacturers of COM-PLY joists can (1 ) 

purchase veneer of the grade required 

for joists and mill residue at. lowest 

cost available for the flakes in the 

flakeboard, or (2) purchase tree-length 

timber and peel veneer of the quality 

needed from that portion of the tree 

with a diameter of 10 in, d.b.h. or 

larger, The peeling residues and 

portions of the tree too small to peel 

are then converted into flakes for the 

f lakeboard, Tree-length timber has 

distinct advantages which offset its 

disadvantages, and is the type used in 

this study, 

One advantage of using tree-length 

timber is that flakes converted from 

residues are of higher quality than 

those made from mill residues typically 

used in particleboard, and with 

relatively little waste, It is assumed 

that wood residues generated from 

trimming veneer into panel widths and 

panel trimming are used in the 

flakeboard core. When computing veneer 

requirements, veneer 10s t during 

manufacture is about 22 &percent, but 

nearly all of it can be converted into 

wood flakes for the core, 

The most important advantage to using 

full-length trees is that wood particles 

of optimum size and shape can be made 

from residues, Particles made by 

chipping roundwood and then milling the 

chips into flakes are ideal for COM-PLY 

joists , Much less resin is required to 

coat large flakes (up to 2 in, long) 

than to coat particles made from sawmill 

residues, which typically contain a 

large percentage of fine material, 

Although more energy is required to dry 

flakes and splinters made from green 

wood than to dry sawmill residues, this 

higher cost is more than offset by the 

reduced amounts of waste, scrap wood, 

and resin. 

A primary advantage of tree-length 

timber is its cost compared to that for 

saw logs, Figure 3 shows the cost per 

cubic foot for southern pine saw logs, 

tree-length pine, and mixed hardwood saw 

logs delivered to the mill. These costs 

were arrived at by dividing the prices 

published by "Timber Mart-South" by a 

factor to convert the prices from 

dollars/M bm to cost per cubic foot, 

The prices are the average for 13 States 

in the Southern and Southeastern United 

States, The conversion factors used were 

215.74 for pine saw logs and 242.21 for 

tree-length pine,4 and 248.56 for mixed 

hardwood saw logsa5 Conversion factors 

can vary depending on the size and 

quality of logs or timber purchased, 

Potential manufacturers of COM-PLY 

should use prices and conversion factors 

that are appropriate for their area, 

- TREND 

W 

0.3 - (3 

1977 I 1978 I 1979 1980 

YEAR 

Figure 3.--Cost of wood that can be used 

to manufacture COM-PLY joists. 

Green cubic feet of log per 

thousand board feet, Scri bner log scale. 

Green cubic feet of log per 

thousand board feet, -Day le log scale, 
In 1979, the midyear trend price per 

cubic foot of green wood was about $0-80 

for pine saw logs, $0,62 for tree-length 

pine, and $0,46 for mixed hardwood logs, 

The straight-line trend for wood cost is 

shown in figure 3, For this analysis 

the mix of wood is 50 percent treelength pine and 50 percent mixed hardwoods, The average trendline price is 

$0.54 ft3, 

The other purchased wood was assumed 

to cost $40 per dry ton, which is about 

$20 per dry ton more than it would cost 

for whole-tree chips according to prices 

published in "Timber Mart-South." 

Potential manufacturers of COM-PLY 

joists must consider all the factors 

discussed and select a low-cost wood 

supply of their own for analysis of 

economic feasibility, However, the 

quality of the COM-PLY joists with 

regard to strength, stiffness, durability, and dimensional stability is greatly influenced by the type of wood selected to make the flakes for the core, 

Therefore, performance as well as cost 

must be considered when determining the 

type and cost of wood selected. 

Particleboard phenolic resin binder, 

Resin cost is a major expense, Figure 4 

shows industrial average prices for the 

phenolic resin used in particleboard on 

a 100 percent solids basis, From 1955 

to 1973 the price steadily declined; in 

1974, it rose drastically as a result of 

shortages of petrochemicals. This study 

assumes the 1979 price of $0,29/lb for 

phenolic resin, The source of wood for 

panels influences the amount of resin 

required in cores, 

0-40 i 

a. 

0.0 1 ' 1 1 1 1 1 

1950 1955 1960 1965 1970 1975 1980 

YEAR 

F i gure 4.--Pr i ce of phenol ic res 1 n per dry 

pound or so I i ds bas i s. 

Particleboard wax, Liquid-wax 

emulsions are added to particleboard to 

reduce thickness swelling when the 

particleboard is soaked in water for 

short periods. These emulsions, roughly 

half wax solids, were priced at $0,082 

per liquid pound in 1979, 

Laminating adhesive, The veneer 

components of COM-PLY joists are glued 

together with standard phenolic plywood 

glue, The 1979 cost for plywood glue 

was $0,09 per mixed liquid pound, 

phenol-resorcinol adhesives that cure 

at room temperature are widely used for 

laminating large structural timbers, 

Such adhesives are a mixture of five 

parts liquid phenol-resorcinol resin and 

one part para-formaldehyde hardener by 

weight. In 1979, the cost of these 

adhesives, when mixed, was about $0.62 

per liquid pound, The adhesives contain 

a large percentage of resorcinol in 

order to allow curing at room temperature in a few hours, but the adhesive 

can be cured with high-frequency heating equipment in just a few minutes. 

Total materials cost, The total annual 

cost for materials was estimated by 

multiplying the quantity of materials 

flowing for each thousand board feet of 

production x the annual production x the 

unit price of the materials, Table 7 

lists each material and the weighted 

average materials flow for 2 x 8's and 

2 x 10's that were taken from detailed 

materials balance analyses. Included 

are the unit prices for materials and 

the weighted average annual production 

for Cases I and 11. 

Labor cost varies with the level of 

skill demanded of workers, fringe 

benefits paid, and geographic location. 

In this report, wage rates per hour, 

including fringe benefits, were: 

unskilled laborer, $5,75; semiskilled 

laborer, $6,75; skilled laborer, $7.50, 

These rates were reported by some forest 

products manufacturers as typical in the 

Southeas tern United States during 1979 , 

Table 8 lists the job descriptions, 

number of workers, number of shifts 

worked, wage rate paid, hours worked per 
Table 7.--Annual cost of materials for a COM-PLY joist factory for Case I and 

Case I1 

Hat erial 

Materials 

requirement 

Unit Total 

price annual cost 

Wood (green tree-length) 

Wood (flakeable residue) 

Flakeboard resin 

Flakeboard wax 

Veneer to veneer glue 

Veneer to core glue 

Total 

Wood (green tree-length) 

Wood (f lakeable residue) 

Flakeboard resin 

Flakeboard wax 

Veneer to veneer glue 

Veneer to core glue 

Total 

........ Dollars........ 

CASE I 

12,103,520 ft3 x 

36,506 ton (dry) x 

16,479,207 lb (dry) x 

2,860,976 13 (liquid) x 

6,327,189 lb (liquid) x 

2,708,968 lb (liquid) x 

CASE I1 

6,510,043 ft3 x 

20,396 ton (dry) x 

9,020,021 Ib (dry) x 

1,565,963 lb (liquid) x 

3,403,156 lb (liquid) x 

1,637,140 lb (liquid) x 

Table 8.--Estimated labor requirements for COM-PLY joist plant 

Case I Case I1 

Time Hourly Daily Time Hourly Daily 

Operation or job Man- worked wage labor Man- worked wage labor 

Workers Shifts days per day rate cost Workers Shifts days per day rate cos t 

Log handling, green 

and dry veneer 

Green end foreman 

Log scaler 

Log-lif t driver 

Yard utility 

Log deck hydraulic crane 

Barker operator 

Deck man 

Bucking saw 

Block-lif t operator 

Block-lif t operator 

Lathe deck 

Lathe operator 

Green end utility 

Clipper operator 

Veneer stacker & green chair 

Forklift 

Dryer tender 

Dryer feeder 

Dry chair 

Forklift 

Number Hours Dollars Number Hours Dollars 

Coat inued 
Case I Case Ii 

Tzme Yourly Daily T~me Hodrly Daily 

Nan- worked wage laacr Man- worked wage Zab.?r 

Workers SnlEts days per day rzte cost Workers Shzfts days per 3ay rate cost 

Hours Dollars 

Veneer lay.Jp, riplng, 

and lamlndtirig 

Dry end forevan 

Stgcjb: rustler 

Veneer Zzyup crew 

Press operator 

Press helper 

Glue rrixer 

Porkllf t 

PLV trem 

Flnaer jointer 

Porkl~ f t 

Flakehoard end giue 

Piakehoard rip 

FarkZ~ ft 

Joist Lamr~at~na L~ne 

SI-~pp~nq s; warehouse farernan 

Shipp~nq clerK 

Car and track loading 

Porklr f t 

Hours Dollars Dollars 

Flakeboard milling and 

drying, and press line 

Flakeboard foreman 

Truck dump 

Front end loader 

Slasher 

Drum flaker 

Milling and drycng operator 

Forming station 

ljtLl1ty 

Press operator 

Forkf if t 

XPsce11aneous 

Quality control technician 

Boiler 

Knife grinder h saw filing 

Cleanup 

Watchman 

Dollars 

Foreman 

Electrici ao 

Elestric~ar 

*<lil&rright 

Millwright 

YiiLwrkght 

Ffachinlst 

Pipefitter 

Parts storeroom 
day, and daily labor cost for each while others require only one, Actual 

operation, Total daily labor cost was energy costs depend on the volume of 

calculated to be $1 2,770 for Case I and materials being processed, efficiency of 

$8,790 for Case 11, These sums the machinery, fuel type, and fuel 

multiplied by the 250 days worked per costs , 

year are the total annual labor costs, Table 9 lists the major energy-using 

At full production capacity, the annual operations for producing composite 

labor costs at the 1979 rate are products and shows the estimated 

$3,192,500 for Case I and $2,197,500 for quantities of electrical and thermal 

Case 11, energy for a given production unit per 

N bm of joists produced, For example, 

Energy Cost drying chips requires 18 to 20 kwh of 

electrical energy for every green ton of 

A COM-PLY joist factory requires two chips processed and 1,980 Btu of thermal 

types of energy for its operation: energy for every pound of water removed 

electrical, to power motors in from the chips, The values for energy 

machinery, and thermal, to dry green shown in table 9 are estimates; actual 

wood and for process steam, Some values in a factory could vary widely, 

operations require both types of energy, depending on machine efficiency, 

Table 9.--Estimated energy requirements for production of COM-PLY joists 

Production unit/M bm Electrical Thermal 

Production operation joists energy per unit energy per unit 

Barking logs 

Hogging waste wood and bark 

Conveying chips, logs, etc . Steaming peeler blocks 

Log cutoff and slasher saws 

Log-sorting deck equipment 

Peeling veneer blocks on rotary lathe 

Veneer drying 

Electrical 

Thermal 

Conveying veneer 

Flaking round and waste wood 

Hammermilling flakes 

Drying chips 

Electrical 

Thermal 

Screening chips 

Blending particles with resin 

Forming particleboard mat 

Prepress mat 

Press mat into particleboard 

Electrical 

Therma 1 

Heat mat 

Heat cauls (if used) 

Heat losses 

Water evaporation 

Radiation 

Convection 

Press panels for PLV 

Electrical 

Press and prepress panels 

Thermal 

Heat panels to cure glue 

Heat cauls 

Heat losses 

Water evaporation 

Radiation 

Convect ion 

Finish joists 

Laminate joists 

Linear feet of logs 

Green tons 

Green tons 

Green tons 

Linear feet of logs 

Linear feet of logs 

Square feet of veneer 

Square feet of veneer 

Pounds of water removed 

Square feet of veneer 

Green tons of wood 

Green tons of chips 

Green tons 

Pounds of water removed 

Dry tons of chips 

Dry tons of particles 

Dry tons of mat 

Square feet of mat 

Dry tons of mat 6 to 7 

Dry tons of mat 

Dry tons of mat 

Dry tons of mat 

Ery tons of mat 

Dry tons of mat 

Dry tons of panels 6 to 7 

Dry tons of panels 

Dry tons of panels 

Dry tons of panels -- Dry tons of panels -- Dry tons of panels -- Number of joists 0.003 

Number of joists 0.015 to 0.023 
Table 10 shows the energy computations 

for producing 2 x 8-12 joists for 

Case 11. For example, the amount of 

green-wood flakes to be dried per M bm 

of joists produced is 1 .7 tons, and 

there will be 1626.44 lb of water 

removed in the process, The electrical 

energy required is 19.8 kwh / green ton 

dried per M bm of joists (from table 9) 

x 1.7 green tons/M being dried, or 33-57 

kWh/M. The thermal energy is 1,980 

Btu/lb of water removed per M bm of 

joists (from table 9) x 1626.44 lb of 

water removed per M bm or 3,220,354 

Btu/M bm. The total electrical and ther- 1 

ma1 power required per M bm of joist 

production are shown in table 9. 

However, the total value for electrical 

energy is shown to be reduced by 70 

percent to account for electric motors 

not being operated at full-rated 

horsepower on a continuous basis. The 

electrical power ranged from between 136 

to 140 kWh/M bm produced for 2 x 8's and 

2 x 10's for Cases I and 11. The 

thermal energy ranged between 48 and 49 

therms/M bm of 2 x 8's and 2 x 10's for 

Cases 1 and IJ, Electrical power was 

assumed to cost $O.O3/kWh and thermal 

energy $0-25 per therm. The total annual 

cost for energy was found by multiplying 

the amount of energy used per thousand x 

the weighted annual production for 

2 x 8's and 2 x 10's x the unit cost for 

energy. However, the materials balance 

analysis showed that between 926 and 960 

lb of green wood (607 to 633 lb, dry 

basis ) would be available for boiler 

fuel for each M bm of joists produced. 

This fuel comes from bark, sawdust, and 

waste too fine to use in the product, 

Assuming 9,000 Btu of heat for each 

bone-dry pound of wood and a boiler 

efficiency of 70 percent, there was 

considerable thermal energy available 

from the boiler that would not need to 

be purchased as fossil fuel. 

For Case I the annual cost for electricity was $697,636 and $2,056,846 for 

fossil fuel without credit for burned 

waste wood, or $427,740 for fossil fuel 

if credit is given for burned waste 

wood . The total annual energy cost for 

Case I was $1,125,376 which assumes 

waste wood is burned for part of the 

fuel. For Case I1 the annual c~st for 

electricity was $379,016 and $208,750 

for fossil fuel after taking credit for 

burned waste wood for a total annual 

energy cost of $587,766. 

His cell aneous Product ion Cas ts 

There are various other costs associated with manufacture that need to be 

accounted for in operating a factory. 

These costs are best obtained from 

accounting records of an actual factory; 

the amounts shown in table 11 are the 

values used in this analysis. 

Sales promotion expenses were arbitrarily assumed to be $1,506,000 for Case I 

and $810,000 for Case I1 and were 

distributed over the first 3 years of 

operation in uniformly declining amounts. 

The 5 percent selling expense listed in 

table 11 is assumed to include a sufficient amount for promotional expense 

required af ter the product is introduced 

to the market. 

Table 12 lists the personnel and 

salaries for Cases I and 11. The total 

annual administrative costs at 1979 

levels are $279,500 for Case I and 

$228,500 for Case 11. Only 50 percent 

of the salaries were paid during the 

first year when there was no plant 

production. 

~epreciat ion Cas t 

Depreciation must be computed to determine the manufacturing costs , taxable 

income, and return on investment. The 

s traight-line method of depreciation was 

used to determine manufacturing cost and 

the sum-of-the-years digit method for 

return on investment, 

Annual Sales, Operating Cash Flow, 

and Total Manufacturing Cost 

This section shows the cash proceeds 

or net earnings that accrue as a result 

of manufacturing operations. Net 

earnings are computed from sales revenue 

minus manufacturing costs and taxes. 

For this analysis, assumptions are zero 

production the 1st year (because of 

plant construction), 20 percent the 2nd 

year, 88 percent the 3rd year, and 100 

percent the 4th through the 10th year. 
Table 16,--Energy required per M hrn to make COM-PLY joists, Case ff 

Energy f4a"rr i a t s 

unit unit Electrical Therma f 

Barking Iogs 

Hogging fuef 

CQnveying wood 

Steaming blocks 

Log cutoff 

Log soraing 

Peel lng veneer 

Veneer drying 

Veneer drying 

Conveying veneer 

Patching panels 

Flaking wood 

Hammermil l lng 

Drying chips 

Dry i ng ch ips 

Screen i ng ch ? ps 

Bfendlng 

Forming ma? 

Prepress mat 

Pressing mat 

Heating mat. 

Heat i ng cau l s 

Wa-1-er I oss 

Radiaflon loss 

Convec$fon toss 

Finish panels 

Finish lumber 

Laminate lumber 

Laminafe lumber 

Press veneer 

WeaP veneer 

Heat cau f s 

Water loss 

Radlatisn loss 

Convection loss 

"E tectr lca l energy is 70 percent sf tota l In order to account "For motors 

not running at Cur (-rate horsepower, 
Table :I.--Values for compr~tirlg miscellaneous productio~ 

costs in operatiqg a COY-PLY factory 

1 ten 

Percent of land, 

Percent buildi?jis, and 

of sale$ faciltties cost 

Proddct on supplies 

Sailtenance supplies 

Utilities 

Grade-cert ification fees 

Otbes office admiqistrative 

expcrises 

Facilities .iai?tenarice 

FatiLFt les tares 

Facilities insurance 

Sales expense 

Ccntin~ency expense 

Table 12,--Personnel and salaries required to operate a COM-PLY joist 

factcry 

Case I Case I1 

Amber Salary Number Salary 

Personnel ofpeople {dollars) ofpeople (dollars) 

General =Rages 

Off ice manager 

Coiolpt roller 

Production rmnager 

Technical director 

Maintenance superintendent 

Wood buyers 

Purchasing agent 

Off ice clerks 

Total 

The cost for various items are assumed 

to escalate throughout the investment 

period, The inflation rates used in 

this analysis are: 

Item 

Compound 

inf lation 

rate 

Wood 1 a 08 

Particleboard resin and wax 1,04 

Labor 1,065 

Power 1909 

Sales and items expressed 

as a percentage of sales 1,08 

as1 other items 1,06 

The Federal income tax assumed was 46 

percent and the local tax rate was 4 

percent, for a total tax rate of 50 

percent, 

Some price has to be assumed for the 

product, In this analysis, the prices 

of CON-PLY joists are assumed to compete 

with those of sawed Xo, 2 grade southern 

pine joists, These average annual and 

trend prices f ,o,b, mill (fig. 5) were 

published by Random Lerrgtzlrs -over the 

last 10 years (see footnote 2) e 

TREND 2 X 10 - 144,H 

TREND 2 x 8 -12 

YEAR 

Figure 5,--Selling price f,o,b, mill for 

No, 2 southern pine 2 x 8 and 2 x 10 lumber, 

Table 13 shows how sales were computed 

for the first 4 years for Case I, 

Tables 14 and 15 show the annual cash 

flow from a COM-PLY joist factory over 

the 10-year investment period for Case I 

and Case 11, Cash flow from sales was 

computed by multiplying the f,o,b, mill 

price x the board footage of joists produced per year as illustrated in table 

1 3, When the factory reaches 100 percent production, it will be operating at 

an efficiency of 85 percent. 

The investments for facilities and 

machinery were not fully depreciated 

during the 70-year investment period 

shown in tables 14 and 15. The terminal 

salvage value used in this report is 

equal to the undepreciated facilities, 

and machinery investment , Because 

terminal salvage is revenue from a sale 

and is taxable, it is treated as a sales 

item during the last year of the 

investment period, 

Computing cash flow for manuf acturing 

costs in tables 14 and 15 is similar to 

computing the cash flow for sales, 

Inflation rates were used to escalate 

costs 'over the 10-year period, Only 50 

percent of the expense for facilities 

was assumed to occur the first year, but 
MLn 

6ft 

wcn 

-a 

MM 
Table 14.--Cash flow from operation of a COM-PLY joist factory during a 10-year investment period, Case la 

l tem 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 

A. Sales 

2x8 

2 x 10 

Term1 na f salvage 

Tota I 

B. Raw materials 

Logs 

Phenol lc resin 

Particleboard wax 

Larni nat i ng adhes i ve 

Tota I 

C. Production expense 

D i rect l abor 

Power and fuel 

Product i on supp l 1 es 

Maintenance supplies 

Utilities 

Tota I 

D. Admlnistratlve expenses 

Genera I management 

Off ice management 

Clerks 

Dues 

Other 

..................................... Thoand of dollars.................................... 

Tota I 139.8 477.2 1,081.3 1,349.5 1,430.5 1,516.3 1,607.3 1,703.7 1,805.9 1,914.3 

E. Sales promotion 753.0 502.0 251.0 .O .O .O .O .O .O .O 

F. Fac I I l ty expenses 

Mai ntenance 68.0 144.2 152.8 162.0 171.7 182.0 192.9 204.5 216.8 229.8 

Taxes 68.0 144.2 152.8 162.0 171.7 182.0 192.9 204.5 216.8 229.8 

I nsurance 34.0 72.1 76.4 81 .O 85.8 91 .O 96.5 102.2 108.4 114.9 

Tota I 170.0 360.4 382.0 404.9 429.2 455.0 482.3 511.2 541.9 574.4 

G. Contingency .O 216.9 937.0 1,265.0 1,366.2 1,475.5 1,593.5 1,721.0 1,858.7 2,007.4 

H. Sales expense .O 542.3 2,342.6 3,162.5 3,415.5 3,688.7 3,983.8 4,302.5 4,646.7 5,018.4 

I. Cost of operations 

(B+C+D+E+F+G+H+L) 1,062.7 14,109.1 30,631.9 37,475.0 38,902.9 40,483.2 42,227.4 44,147.6 46,256.7 48,568.8 

J. Taxable income (A-I) -1,062.7 -3,263.9 16,219.4 25,774.2 29,406.3 33,290.7 37,448.4 41,902.3 46,677.2 52,516.6 

K, Income tax (50% x J -531.4 -1,631.9 8,109.7 12,887.1 14,703.2 16,645.3 18,724.2 20,951.2 23,338.6 26,258.3 

L. Depreciatfon 

Mach i nery .O 6,111.4 5,500.2 4,889.1 4,278.0 3,666.8 3,055.7 2,444.5 1,833.4 1,222.3 

Faci I itles .O 1,056.8 951.2 845.5 739.8 634.1 528.4 422.7 317.1 211.4 

Total .O 7,168.2 6,451.4 5,734.6 5,017.7 4,300.9 3,584.1 2,867.3 2,150.5 1,433.6 

N, After-tax prof It (J-K) -531.4 -1,631.9 8,109.7 12,887.1 14,703.2 16,645.3 18,724.2 20,951.2 23,338.6 26,258.3 

N. Net earnings (M+L) -531.4 5,536.3 14,561.1 18,621.7 19,720.9 20,946.3 22,308.3 23,818.5 25,489.1 27,692.0 

aData may not add to totals due to rounding and truncating. 
Table 15.--Cash f low from operation of a CM-PLY joist factory during a 10-year i nvestmeni period, Case f la 

I tern I979 1980 1981 1982 1983 1984 1985 1986 1387 1988 

A. Safes 

2x8 

2 x 10 

Terminal salvage 

Total 

B. Raw materials 

Logs 

Phenolic resin 

Particleboard wax 

Laminating adheslve 

Total .0 1,786.5 7,603.8 10,116.7 10,771,l 11,471.0 12,2?9.8 13,021.0 13,878.5 14,796.4 

C. Production expense 

Direct labor .O 702.1 1,994.0 2,654.5 2,827.0 3,010.8 3,206.5 3,414.9 3,636.9 3,873.2 

Power and fuel .0 128.1 558.7 761.2 829.7 904.4 985.8 1,074.5 1,171.2 1,276.6 

?reduction supplies .O 114.5 485.5 643.3 681.9 722.8 766.2 812.1 860.9 912.5 

Maintenance supplies .O 57.3 242.7 321.6 340.9 361.4 383.1 406.1 430.4 456.3 

Uti I ities .O 5.7 24.3 32.2 34.1 36.1 38.3 40.6 43.0 45.6 

Total .O 1,007.7 3,305.2 4,412.8 4,713.7 5,035.5 5,379.8 5,748.2 6,142.4 6,564.3 

D. Adm f n istrat lve expenses 

General management 31.3 66.3 70.2 74.4 78.9 83.6 88.7 94.0 99.6 105.6 

Office management 38.8 82.2 87.1 92.3 97.8 103.7 109.9 116.5 123.5 130.9 

Clerks 44.3 93.8 99.4 105.4 111.7 118.4 125.5 133.1 141.1 149.5 

Dues .O 57.3 242.7 321.6 340.9 361.4 383.1 406.1 430.4 456.3 

Other .O 40.1 169.9 225.1 238.7 253.0 268.2 284.2 301.3 319.4 

E. Sales promotion 405.0 270.0 135.0 .O .0 .O .O .O .O .O 

F. Facility expenses 

Maintenance 42.9 90.8 96.3 102.1 108.2 114.7 121.6 128.9 136.6 144.8 

Taxes 42.9 90.8 96.3 102.1 108.2 114.7 121.6 128.9 136.6 144.8 

l nsurance 21.4 45.4 48.1 51 .O 54.1 57.3 60.8 64.4 68.3 72.4 

Total 107.1 227.1 240.7 255.2 270.5 286.7 303.9 322.2 341.5 362.0 

G. Contingency .O 116.7 504.0 680.4 734.8 793.6 857.1 925.7 999.7 1,079.7 

H. Sales expense .O 291.7 1,260.3 1,701.0 1,837.1 1,984.0 2,142.7 2,314.2 2,499.3 2,699.2 

I. Cost of operations 

(B+C+D+E+F+G+H+L) 626.4 8,795.5 17,998.8 21,790.1 22,524.6 23,344.8 24,256.9 25,267.6 26,384.2 27,614.6 

J. Taxable fncme (A-1) -626.4 -2,962.3 7,200.8 12,229.4 14,216.4 16,335.5 18,597.8 21,015.5 23,601.5 26,845.7 

K. Income tax (50% x J) -313.2 -1,481.1 3,600.4 6,114.7 7,108.2 8,167.7 9,298.9 10,507.7 11,800.8 13,422.8 

L. Depreciation 

Machinery .O 4,085.0 3,676.5 3,268.0 2,859.5 2,451.0 2,042.5 1,634.0 1,225.5 817.0 

Faclllties .O 671.3 604.2 537.0 469.9 402.8 335.6 268.5 201.4 134.3 

Total 

M. After-tax profit (J-K) -313.2 -1,481.1 3,600.4 6,114.7 7,108.2 8,167.7 9,298.9 10,507.7 11,800.8 33,422.8 

N. Net earnings (M+L) -313.2 3,275.2 7,881 .1 9,919.8 10,437.6 11,021.5 11,677.1 12,410.3 13,227.7 14,374.1 

aData may not add to totals due to roundlng and truncating. 
the entire expense occurred in subsequent values were divided by 169,712,000 fbm 

years, of joists produced per year for Case I 

Total sprating costs for tax eomputa.-- 

tions were found by totaling the costs 

for raw mterials, production, adminis-. 

trationr sales promotion, facilities, 

contingencies, sales, and depreciation, 

For example, the operating cast for Case 

I in the f~~sth year, when fukk production is reached, is shown as $37,475,000, 

~epreciatisn is included with the 

operating cost because the Internal 

Revenue Service allows depreciation to 

be deducted as an expense for tax camputations, Depreciation began in the 

second year, when most of the investment: 

for mchinery and facilities had been 

made, 

The taxable income is +be difference 

between sales and total operating costs, 

including depreciation, For the fourth 

year, the taxable income is $25,774,200, 

Tax on income for the fourth year is 

$1 2,887,100 and after-tax profit is 

$12,887,400, 

To obtain the annual net earnings for 

the fourth year, the depreciation is 

added back to the after-tax profit, The 

net earnings for the fourth year are 

$18,621,700, 

and 97,882,000 fbm for Case II to obtain 

the cos t/M f t2 . Table 16 shows the 1979 

estimated manufacturing cost for CON-PLY 

joists for Case Z and Case 11, 

Computing the operating costs shown in 

tables 14 and 15 is difficult, and 

accurate data are not easily obtained, 

potential manufacturers sf COM-PLY 

joists probably have a good source of 

data in their own company records, Ry 

using their own data and making computations similar to those shown in this 

section, rnanuf acturers can accurately 

estimate the factory cost for their own 

company, 

Net Cash Plow and Internal Rate of Return 

Potential manuf acturers of COM-PLY 

joists want to know what return on their 

investaent they can expect from the cash 

proceeds of net earnings, The return on 

investment is found by determining interest rates on the basis of the presentvalue concept. In simple terms, if we 

invest $100 today at 6 percent interest, 

the value 1 year from today is $1 06, 

The $106 is called the future sum, The 

future sum includes the original amount 

(present value) plus interest accumulated (return on investment), The $100 is 

Notice that a neqative income tax is analogous to investments or cash outlays 

shown for the first and second years and 

it would be more correct to show zero 

income tax for these years, The Federal 

Government does not make tax refunds to 

companies that have a loss from 

operating, However, a large company 

could charge off these losses against 

other parts of the business that were 

operating profitably; therefore, they 

have ken left in this analysis, 

Operating costs shown in tables 14 and 

15 can be used to compute average 1979 

manufacturing cost of joists, This cost 

is computed by discounting the amount 

for each item during the fourth year 

back to the 1979 cost, Total expense 

for sales promotion was averaged for the 

10 years to give an average yearly cost 

for 4 979. Straight-line depreciation 

for a 10-year period was used for 

computing depreciation cost for 1979. 

After mking these adjustments, the 1979 

to build a factory, while the $106 is 

analogous to cash proceeds resulting 

from profitable operation, 

Computing the present value of future 

sums at a given interest rate is referred to as discounting, In this study, 

the annual cash outlays (such as payout 

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 at which the present value of the cash outlays equals 

the present value of the cash proceeds, 

This procedure is widely used for 

evaluating the economic feasibility of 

investments and is often referred to ds 

a discounted cash-flow analysis. The 

appropriate compound interest or 

discount rate is found by trial and 

error, 
Table 16.--Manufacturing cost fn dollars 

per thousand board feet of joists, 

Case 1 and Case ti * 

l tern Case Case 

I I I 

Dollars 

Wood 

Particleboard resln 

Particleboard resin catalyst 

Particleboard wax 

Laminating adhesive 

Labor 

Power and fuel 

Other production expense 

Administrative expense 

Sales promotion 

Facilities expense 

Cont i ngency expense 

Sales expense 

Depreciation 

Tota I 

A low interest rate is selected and 

the net annual cash flow (outlay and 

proceeds) or future sums are converted 

to their present value on the basis of 

the rate selected. If the cumulated net 

annual cash flow is positive, then the 

present value of the cash proceeds is 

greater than the present value of the 

cash outlays for the 10 years of the 

investment period, In that case, a 

higher interest rate is selected and the 

procedure is repeated until a rate is 

found at which the positive present 

value of cash proceeds equals the 

negative present value of cash outlays, 

This interest or discount rate is called 

the internal rate of return, Internal 

rate of return was computed for Case I 

and Case I1 by the procedure outlined, 

The after-tax internal rate of return 

for Case I is 34.5 percent and for Case 

11, 27.3 percent, These are quite 

attractive returns on investment, Most 

banks would expect to see an analysis to 

show an after-tax return on investment 

of at least 25 percent before they would 

lend money for the investment, 

In this era of high inflation, many 

manufacturing firms find that the price 

of investment capital is somewhere near 

15 percent, which is about the amount 

they must pay to b0rro~ for a new 

venture. Tables 17 and 18 show the cash 

flow for Cases I and I1 at a discount 

rate of 15 percent. 

Column 1 in tables 17 and 18 shows 

the year or period of investment. Year 

0 represents the beginning of year 1, 

but numbers 1 Llrough 10 represent 

yearend times, 

Column 2 shows cash outlay except 

for the value at year 70, This value 

represents working capital (cash, 

inventory, accounts receivable) tlat is 

recovered at the end of the investment 

period. The recovered working capital is 

treated as a positive nontaxable cash 

flow 8 

Column 3 is taken from the net earnings (tables 14 and 15). If production 

operations are unprofitable, the net 

earnings will be negative; if profitable, the net earnings are positive and 

represent cash proceeds. 

Column 4 is the sum of columns 2 and 

3 and represents net annual cash flow, 

Column 5 lists the present-value 

factor for a 15 percent interest rate. 

At rates of return less than 15 percent, 

a company might be better off to invest 

elsewhere. The values in column 4 

represent future sums at the end of the 

year indicated. By multiplying the 

values in column 4 by the present-value 

factor in column 5, the amount in column 

4 is discounted (moved backward through 

time) to its present value (shown in 

column 6), For example, at the end of 

year 5, the net annual cash flow for 

Case I was $1 9,720,900 and the present 

value of annual return was $9,804,800, 

In other words, if we had invested 

$9,804,800 at time zero at a compound 

interest rate of 15 percent, we would 

have a future sum of $19,720,900 at the 

end of 5 years, 

Column 7 shows the cumulative present 

value of annual cash flow in column 6. 

At a discount rate of 15 percent, the 

$48,612,500 investment in Case I would 

be paid back in 5.6 years. The internal 

rate of return is 34.5 percent, In other 

words, if we had used present-value factors for a discount rate of 34.5 percent, the investment would have been 

paid back at the end of the 10th year * 
Table 17---Dlscounted cash flow, payback period at 15 percent borrowing rate, and internal rate of return for 

a 10-year investment perfod, Case I 

Year Optlay + Proceeds = Cash flow x Present value = Present value Cumulative 

(investments) (net earnings) at 15% annual return present value 

........................................ uand of dollar_s.........................~.....,,~, 

Pay back period is 5.59036 years at 15 percent borrowing rate; internal rate of return for 10-year investment per f od is 34,5149 percent; break-even point is 41,334.3 M bm per year, 

Table 18.--Discounted cash flow, payback perfod at 15 percent borrowing rate, and internal rate of return for 

a 10-year investment period, Case II 

Year Out1 ay + Proceeds = Cash flow x Present value = Present value Cumu l at i ve (investments) (net earnings) at 15% annual return present value 

....................................... sands of do1 .................................... 

Payback period is 6.59305 years at 15 percent borrowing rats; internal rate of return for 10-year investment period is 27.3036 percent; break-even point is 27,614.: M bm per year, 
For Case 11, the $31,355,500 investment 

would be paid back in 6,Q years, The 

internal rate of return Eor Case EI is 

27,3 percent, 

An analysis was made sf the return 

the owners would receive on their equity 

invested in Cases I and 11, It was 

assumed Llat the owners provided about 

25 percent sf the total iqvestment, 

which is a typical percentage lending 

ins ti tutions require. it Tc$as assumed 

that Lending institutions would charge 

15 percent iqterest on their part of the 

investment and that any cash surplus 

could be invested at a rate of 11 

percent. The after-tax return on owners 

equity was 35,55 percent for Case 1 and 

30,31 percent for Case 11 which is 

greater thaa the internal rate of return 

for both Gases I and 11, Tables 19 asad 

20 show the detailed computatLons of 

return on owriers equity for Cases I and 

I$, respectively, 

Discussion and Conclusions 

This stddy s'i-n~ws that it is economically feasible to manufacture COM-PLY 

joists now, with a possible after-tax 

internal r3te of return of more than 25 

pxrcent, The :nanufacturing csst is coqparable to that for sawed lumber joists, 

The number of logs in the sizes requireci 

for naking conventional lumber joists 

seems certain 5s decline, so there will 

be a ready market for the composite 

produc-e , PB- P rrms that are already manufacturing 

particleboard and veneer might realize 

grecter returns by nanufacturing GOM-PLY 

joists, me emversic4;;ra investment would 

he less than the investment for a new 

factory sSown here, and a positive 

annual cash flow would 3ccur sooner than 

if a new piant were builts This approach 

would make sense for other reasons, So 

many particleboard plants have been 

built in recent years +hat there is too 

much productive capacity in the United 

States, As a result, many garticlebeard 

plants In the United States are yielding 

a very low internal rate sf return, The 

earning capacity sf such plants could be 

improved by converting them to CBM-PLY 

joist production, 

Consumer demand for particleboard 

often peaks a year or 4x0 after peak 

demand for lumber, primarily because 

demand for lumber is greatest during a 

housing boom, After a housing boom 

subsides, the need EGT lumber drops off, 

as it did late in 1973, Subsequently, 

construction of shopping centers and 

manufacture of furniture increase, 

creating a strong demand far particleboard, Theref sue, a aanufaeturer can 

weather market fluctuations by producing 

both COM-PLY joists and particleboard in 

one factory, A manufacturer can shift 

production to -%-Ae product in greatest 

demand, 

Potential manufacturers should caref uLhy compare the nanl~f acturing costs 

for COM-PLY joists with those for manufacturing sawed lurnher, One of the 

greatest expenses in making conventional 

sawed lumber is the csst of wood, During 

geriods sf &peak demand for lumber, the 

prices for stumpa~e increase--sore so 

for softwoods than hardwoods. COM-PLY 

joists can more cornplecely utilize the 

whole tree and can be nade from a mixture sf hardwoods and softwoods, thus 

easing supply pressure during periods sf 

peak demand, If the s~pply of logs 

within a reasonable distance from a 

sawmill ;s insufficient, the mil% can be 

forced to close, A sawnill faced with a 

limited timber supply cog%d convert ta 

compcsite joists and co~einue tq operate 

on the limited supply 35 logs Eor nany 

years, Conversion Is possible because 

fewer and lower quality lags are needed 

for COM-PLY joists, It must be stresse6 

that even though veneer Ls dsed in 

COF!-PLY lumber, it does not require 

hiqh-priced veneer Logs for manufa~ture r 

Tree-length timber, which zssts about 63 

percent of veneer logs, will provide all 

the veneer required for :nanufdct~lre and 

should be used instead of veneer %sgs, 

W manufacturer of COM-PLY joists has a 

distinct raw-materials cost advantage, 

Wood represents a smaller prapoutisn of 

the cost of a @OM--PLY joist -&an a sawed 

joist* For COM-PLY 2oists, the costs 

for resin binder, wax, and laminating 

adhesive is slightly greater than for 

wood. However, these costs are more 

stable and changes in them normally do 

not coincide with changes in wood costs 

nor do they rise as rapidly, 

As time passes, the advantage of 

COM-PLY joists over conventional sawed 
joists is likely to increase, Research 

on fur tker improvements for composite 

wood products continues, Recent studies 

made by the Hood Products Research Unit 

at Athens, Ga,, have demonstrated that 

isocyanate laminating adhesives make a 

quality glueline between the veneer and 

the core which can be clamped for as 

little as 30 minutes at room temperature 

for curingm6 The current cost of 

isocyanate adhesives is slightly higher 

than the 1979 cost for phenol-resorcinol 

adhesives used in this economic analysis, 

However, it appears that in the future 

the costs will be competitive, and the 

short curing time without the use of 

costly heating equipment will reduce 

manufacturing costs , 

Potential manufacturers also have 

alternate methods available for 

preparing the veneer. Veneer sheets can 

be fed into a continuous laminating 

press so that veneer can be 

butt-jointed,' This method would reduce 

labor and eliminate the f inger-joint 

operation, would speed up production, 

and probably decrease the investment, 

Another method, which also reduces labor 

costs because it eliminates the 

finger-joint operation, is to use a 

long, single-opening hot-press instead 

of the standard multiplaten plyood 

press for laminating, The advantage of 

this method is that the veneer panels 

can be laid up in long lengths modular 

to joist lengths, 

Potential manufacturers can estimate 

costs for alternate manufacturing 

procedures and materials to determine 

which method is most economical in 

relation to their equipment. 

COM-PLY joists have been used in 

demonstration houses and builders prefer 

them to sawed joists because they are 

straight, do not warp, can be obtained 

in long lengths, and are more uniform in 

stiffness properties, The Department of 

HUD has accepted the COM-PLY joists 

performance standards, Therefore, the 

market and investment opportunities 

appear excellent for this new product, 

6~ick, Charles 8, An emulsion 

polymer/isocyanate adhesive for 

laminating composite lumber, For, 

Prod. J, In press; 1984, 

7~c~ l lster, Robert He; Wi ttenberg, 

Dick C, Effect of veneer butt-joint 

surface on the strength and stiffness 

of compos i te beams, Southeastern Forest 

Experiment Station, Athens, Ga, 

(Unpublished draft on file,) 
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