Principles of Corporate Finance

Timing

Example

You may harvest a set of trees at anytime over the

next 5 years. Given the FV of delaying the harvest,

which harvest date maximizes current NPV?

% change in value 28.8 20.3 15.4 11.9 9.4

Net FV ($1000s) 50 64.4 77.5 89.4 100 109.4

0 1 2 3 4 5

Harvest Year