page_title: Optimal rotation age
section_title: Economically optimum rotation age
hierarchical_section_title: Optimal rotation age / Economically optimum rotation age
caption_attribution_description: English: Graph
context_page_description: In forestry, the optimal rotation age is the growth period required to derive maximum value from a stand of timber. The calculation of this period is specific to each stand and to the economic and sustainability goals of the harvester.
context_section_description: In forestry rotation analysis, economically optimum rotation can be defined as “that age of rotation when the harvest of stumpage will generate the maximum revenue or economic yield”. In an economically optimum forest rotation analysis, the decision regarding optimum rotation age is undertake by calculating the maximum net present value. It can be shown as follows:
  Revenue (R) = Volume X Price
  Cost (C) = Cost of harvesting + handling.
  Hence, Profit = Revenue – Cost.
  Since the benefit is generated over multiple years, it is necessary to calculate that particular age of harvesting which will generate the maximum revenue. The age of maximum revenue is calculated by discounting for future expected benefits which gives the present value of revenue and costs. From this net present value (NPV) of profit is calculated.
  This can be done as follows:
  NPV = PVR – PVC
  Where PVR is the present value of revenue and PVC is the present value of cost. Rotation will be undertaken where NPV is maximum.
  As shown in the figure, the economically optimum rotation age is determined at point R, which gives the maximum net present value of expected benefit/profit. Rotation at any age before or after R will cause the expected benefit/profit to fall.
caption: NPV and its relationship with rotation age and revenue
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