Valuation, depreciation and the rate base

Bibliographic data

Monograph

Identifikator:: 174667931X

URN:: urn:nbn:de:zbw-retromon-119897

Document type:: Monograph

Author:: Grunsky, Carl Ewald http://d-nb.info/gnd/10180959X

Title:: Valuation, depreciation and the rate base

Edition:: 2. ed., revised and extended

Place of publication:: New York

Publisher:: Wiley

Year of publication:: 1927

Scope:: X, 500 Seiten

Digitisation:: 2021

Collection:: Economics Books

Usage license:: Get license information via the feedback formular.

Chapter

Document type:: Monograph

Structure type:: Chapter

Title:: Chapter IV. Essentials of value

Collection:: Economics Books

ESSENTIALS OF VALUE 3 other causes, should be regarded as investment, will depend upon the circumstances of each case. The Commission discusses methods of ascertaining the ‘ cost of establishing the business ”” and “ going value ”’ in Green Bay vs. Green Bay Water Co. (Wis. R. C. R,, Vol. 11, p. 243-252), and in this case says: “The method which is generally followed by the Commis- sion aims to determine, as far as possible, what the actual cost of developing the business in question has been, and to what extent, if at all, such losses have been recovered in later years of operation. There are a number of difficulties in determining, by this method, what the cost of building up a business has been, among which may be mentioned: “1. Entire or partial lack of records covering the develop- ment period. “2. Difficulty of finding original cost of physical plant. “3. Difficulty of eliminating from reported operating expenses amounts which are the results of extravagance, inefficiency, or other causes which tended to keep the costs above a nominal figure. “. .. This method, where it can be applied to its full ex- tent, enables the investigator to determine what it has actually cost the utility in question to build up its business. This sum, added to the actual investment in the physical plant, gives the total amount which the plant and the business have actually cost. . . . Where it is impracticable to determine what the actual cost of the physical property has been the only method of arriving at the value of that property is to ascertain the cost of reproduction. “ The method of determining going value as followed by Mr. Alvord, and which, for the sake of convenience we will refer to as Alvord’s method, is an attempt to fix the amount which it would cost to reconstruct the business of the utility, somewhat as a physical valuation reveals the cost of reconstructing the physical plant. There are two assumptions vital to this method: “1. A city similar in all respects to the one under considera- tion, except that there is no public water supply system but in which the people are in a general way cognizant of the advan- tages of such a water supply. “2. Capital seeking investment which may be either used to construct a plant and business in the city with no water supply or to purchase the existing plant and business. 6¢

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