TreeCents Tutorial
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TreeCents Manual
Trouble-Shooting

 

Key TreeCents Elements

bulletEXCEL™  template operations
bulletButton navigation
bulletFour alternative land use investment options
bulletData organization formatting
bulletHidden automatic calculations
bulletCost, Revenue & Financial Feasibility reports
bulletStandard financial indicators
bulletFour types of omnipresent help toggles

A TreeCents example manual is available on-line (see manual page)

What is TreeCents Doing and How Does it Do it?

bulletTreeCents runs in MS-EXCEL™ because that program is widely available and constant updates recognize old programs. Our visual basic programming converts general Excel spreadsheets into forestry investment data and output templates. This makes TreeCents an easy and accessible platform for novice and advanced users alike. No additional programming is necessary although you will have to reset your Excel security to medium so that it will read the visual basic macros we use to organize and process TreeCents analyses.

 

bulletDuring each session, users have the choice of analyzing new timber plantation investments, treatments of existing forests, or agricultural and pasture uses of the same land base. It is possible to load and compute all four project formats simultaneously and compare relative use profitability by similar criteria.

 

bulletTreeCents relies on visual basic programming (that users never see) to organize the program so that all the ugly data transformations and mathematical operations are hidden. Users just push buttons to visit only the small subset of 150 analytical windows needed to put together a unique timber (or other land use) investment project specifications.

 

bulletEvery project data window is designed to organize user thinking about the kind of information that might be relevant to their timber investment. There are distinct, logically grouped, data entry points that are based on how forest owners and foresters visualize projects. There are default project example entries to demonstrate how data inputs should look. Behind the scenes, the program then reorganizes the data and processes it into the required formats for the complicated mathematics of financial analysis.

 

bulletTreeCents takes the separate forestry variables such as acres and volumes and combines them with cost and revenue information to calculate expected cash flows in known years. Behind the scenes, TreeCents also adjusts cash flows for inflation, real change rates of prices and costs so users just have to specify whether things are changing, but don't have to do the very messy adjustments.

 

bulletThe cash flows are tracked in before and after-tax formats. TreeCents adjusts cash flows for their after-tax equivalents according to a unique user-specified federal, state, and local tax environment. Tax computations are interactive where necessary, recognizing ordinary income and capital gains tax interactions, yield-severance-productivity timber taxes, and ad valorem property taxes. These include amortization, tax credits, cross deductibility, capitalization requirements and cost basis depletion.

 

bulletTreeCents reorders cost and benefit streams and reports them to users in clear report formats so users can check whether their entries are complete and accurate. Individual project data sets themselves can be read by non-geek humans. The can be saved for archiving purposes, reporting or to serve as the basis for designing subsequent projects as many different timber projects have great similarities in their data requirements.

 

bulletThe imbedded financial calculation modules automatically identify cash flow patterns, interactions and contingencies. They match user needs to the appropriate financial formulas and redesign the formulas appropriately for the unique project design. These calculate present equivalent values in the patterns and formats needed to represent the desired financial criteria. It reports these criteria in one page with before-tax and after-tax values.

 

bulletReported financial criteria include two absolute wealth effect measures that are common to forestry: Net Present Value (NPV/acre) and Soil Expectation Value (SEV/acre). Both of these criteria sum the present equivalent of the long irregular pattern of forestry cash flows. The difference is that SEV is calculated from infinitely repeated rotation cycles of the same harvest pattern, where NPV only calculates the present equivalent value of one cycle. For plantations started from bare land, NPV and SEV converge as rotatation cycle length increases much beyond 60 years.

 

bulletTreeCents warns users when criteria such as SEV and NPV are not comparable. For example, an uneven-age harvest series starting from an almost mature stand will always have an NPV larger than a plantation SEV. That's because one timber investment starts from a large bundle of dedicated forest capital (land plus lots of inventory) and the other starts from a little (just bare land). TreeCents tries to warn you about any similar tricky computational or interpretive step.

 

bulletRelative criteria are really useful for comparing between projects with unlike starting points or land uses. TreeCents relative criteria include the banker's preferred "Realizable Rate of Return" (RRR). RRR is a modern formulation of internal rate of return or return on investment that measures how hard investment capital is working in per cent per year terms. This makes timber investments directly comparable to non-forestry projects and financial instruments such as bonds or certificates of deposit. TreeCents also calculates the farmers friend "Equivalent Annual Income" (EAI). EAI converts forestry's irregular long-run cash flows into an annual equivalent net dollars per acre figure that you may directly compare to annual crop and grazing projects. Relative indicators come from converting present value patterns into appropriate ratios that change a criterion's function. TreeCents is smart enough to remember something that most analysts forget--to normalize relative criteria for the amount of initial non-cash capital invested to remove investment scale biases.

 

bulletLooking into the future is an uncertain occupation. That's why TreeCents is set up for automatic bet-hedging. Users can specify the degree of pessimistic and optimistic futures. TreeCents calculates how cash flows change to represent these project brackets around the base case data input. So in the final report, you can see your own idea of how badly or wonderfully each project could turn out instead of looking only at one base case outcome.

 

bulletAll the while, TreeCents realizes that some of its humans will need advice on what things are, what processes are going on, where to get data, how to interpret things and where to go for help. That's why four different types of program feedbacks are built in. Alarm bells, help and definitions, interpretive guides, and a complete user manual including a tutorial are designed to toggle into view with the touch of buttons in almost every window.

 

bulletThe real utility of a financial analyzer is as a simulator. TreeCents uses loop navigation from results straight back to the project's appropriate starting point. This accelerates your ability to get a project designed, check out its financial implications and then rerun it quickly with small variations. This is really useful for three reasons: (1) you may want to check the sensitivity of data you're not sure about, such as interest rates or harvest volumes; (2) by running different silvicultural regimes for the same project, you can search for the one that gives you the best financial results; and finally, (3) you can build in non-timber considerations such as wildlife habitat improvement and measure how much including other management objectives into timber projects costs you. As many aesthetic, ecological, conservation and wildlife objectives are complementary with the right kind of timber designs, you'll be surprised how easily a private forest owner can have it all--achieve multiple non-market objectives profitably.

 

The easiest way to see if TreeCents would work for you is to buy one today. See our pricing and order information page.

 

Copyright © 2003 Forest Econ Inc.
Last modified: 12/19/08