A manager of a forestry company in Scotland has to decide which trees to plant. There are three main species to choose from, Sitka Spruce, European Larch or Lodgepole Pine.
Whatever trees are planted they have to be thinned after 10 and 20 years and the wood from the thinning is sold for a profit.
Each kind of tree has a different planting cost per hectare, a different growth rate and a different value per hectare depending on the age the tree is felled.
All this information is given in the table below (in thousands of £s):
|Planting cost per hectare||120||115||130|
|Profit per hectare from 10 year thin||10||15||20|
|Profit per hectare from 20 year thin||40||40||30|
What strategy for planting and felling would you recommend to the manager in order to maximise the profit after 70 years, 90 years, more generally?