Growth of capital value of a tree: optimal cutting time depends on the interest rate Lumber value ($, log scale) Years of life $150 $300 $600 $1,200 $2,400 $4,800 $9,600 0 4% interest rate 3% interest rate Cut at 50 yr (growth = 4%) Cut at 60 yr (growth = 3%) Lower rate ⇒ hold longer ⇒ cut later. Value of timber 50 $3,869 Interest rate on alternative investments 2% 6% At a 4% interest rate the tree's growth rate falls to 4% at age 50 (value ≈ $3,869). Cut when the tree's growth rate drops to the interest rate.