operations-management Essay Connery Timber owns the rights to log on

 Connery Timber owns the rights to log on a 40,000-acre parcel of federal land in western Washington State. The company can log this property in three ways: full clearcut, partial clearcut, or selective removal.Due to controversy over the spotted owl and other species native to the area, Connery must prepare an environmental statement describing how it will log the land. The environmental statement will be reviewed by citizen groups and the state and federal government. Both the state and federal government must approve the environmental statement before Connery can log the property.Company foresters estimate that the land contains an average of 360 harvestable trees per acre, and each cut tree is worth $50 to the company. The following listing presents the percentage yield per acre and the cost per acre for the three methods of harvesting the trees.Harvesting MethodYield per AcreCost per AcreFull clearcut95%$8000Partial clearcut80%$7000Selective removal70%$9000In the past, similar proposals have been submitted to state and federal agencies, yielding the following percentages of state approvals:Harvesting MethodPercentage WinningState ApprovalFull clearcut40%4/6Partial clearcut60%Selective removal90%Whenever the company gains state approval, it then applies for federal approval. The percentage of past proposals that won state approval which then won federal approval are as follows:Harvesting MethodPercentage of State-Approved Projects Winning Federal ApprovalFull clearcut40%Partial clearcut60%Selective removal90%Connery also has the option of including in its environmental statement a pledge to donate 10,000 acres of land it owns to the national park system for a wilderness preserve. The value of this land to Connery is $5 million. If the company pledges this donation, it estimates that the probability that the environmental statement will be approved by the two governmental agencies is as follows:Harvesting MethodProbability of State and Federal ApprovalFull clearcut0.70Partial clearcut0.95Selective removal1.00If the companys environmental statement is not approved, it will forfeit its right to harvest this land and the lease will be turned over to another logging company. In this event, the company will receive net compensation of $1000 per acre.What are your recommendations regarding the companys optimal strategy for this land? Include with your recommendations the decision tree used in your analysis and all detailed calculations.

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