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Title:	Analyzing Investments in Thin-Kerf Saws
Author(s):	Steele, Philip H.; Araman, Philip A.
Date:	1996
Source:	Proceedings, 24th Annual Hardwood Symposium. pp. 55-60.
Description:	The rising cost of hardwood sawlogs has increasd sawmill managers' interest in considering the installation of thin-kerf sawing machines in their sawmills. Replacement of circular headrigs by band headrigs and/or reducing resaw kerfs are the available options. Equipment replacement or modification to achieve thin-kerf sawing will require an investment. Sawmill managers making such an investment will desire to reduce risk by determining the probable investment outcome. Determining the probable outcome with some certainty can require a complex analysis. The staffs of many sawmill firms don't possess all the required information to perform such a complex analysis. One option for them is to turn to a consultant with the required skills. However, a preliminary analysis to determine the relative potential for the investment will help sawmill managers determine whether employing a consultant would be worthwhile. ECHO (Economic Choice for Hardwood Operations) is computer software that incorporates the skills of a trained investment analyst to assist sawmill managers in developing a detailed analysis of the investment results from expenditures for thin-kerf sawing equipment and services. Although the ECHO software is detailed and accurate, it is not intended to be the final estimate of financial feasibility. Obtaining professional investment advice is necessary to prevent errors of judgement in performing the analysis. This paper describes how to perform an analysis of an investment in thin-kerf sawing by describing the steps performed by ECHO to determine payback period, rate of return, and present net worth. A hypothetical installation of a band headrig to replace a circular headrig is used as an example. The logic behind the ECHO steps to perform the analysis is explained using the information for the example sawmill investment. The explanation of this logic should assist those who desire to perform such an analysis to do so even without the ECHO software.
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