Valuation, depreciation and the rate base

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Monograph

Identifikator:: 826606091

URN:: urn:nbn:de:zbw-retromon-66614

Document type:: Monograph

Author:: Hertzka, Theodor http://d-nb.info/gnd/118825186

Title:: Währung und Handel

Place of publication:: Wien

Publisher:: Manz

Year of publication:: 1876

Scope:: 1 Online-Ressource (VIII, 416 S.)

Collection:: Economics Books

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THE PURPOSE OF THE APPRAISAL LI him, as already set forth, is $64.17 on each $100 of original cost, but, as owner, he at once finds that, of his capital ordi- narily available for other purposes, an amount equal to 35.83 per cent of the cost of a new steamboat is, to all intents and purposes, tied up in his steamboat business. It has become dead capital, for all purposes except replacement, so long as he remains in the steamboat business. This 35-83 per cent at interest at 6 per cent is necessary to supplement the annuity regularly going into the amortization fund, together with which at the end of the 20-year period it will just replace the steamer. Whether or not the 35.83 per cent is actually set apart is immaterial; the fact remains that ownership of the depreciating steamer renders this amount of capital as already stated unavailable or dead for any purpose other than replacement, and the new owner is entitled to interest on this 35.83 per cent just as well as on the 64.17 per cent which he paid for the steamer. The demonstration of this fact may be made as follows: The purchaser of the steamboat, who buys the boat when it has a remaining period of usefulness of ro years, invests, as has been explained, $64.17 for each $100.00 of the original cost of the steamboat. He is unquestionably entitled to interest on this sum, together with amortization, which at the assumed interest rate of 6 per cent will be: Interest at 6 per cent on $64.17 perannum................... 8s Amortization annuity for the remaining ro years, during which the investment of $64.17 is paid back to the purchaser (87-59 on each $100)............. et ’ This is exactly the same as though, instead of the value of the steamboat, the capital originally invested had been taken into account, in which case the original owner or purchaser would be allowed: Interest at 6 per cent on the investment of $100 per annum...... $6.00 Amortization annuity to retire $100 of the investment within the life of the steamboat, that is, within 20 years................ + 72 Total. os crs eeveaviirasens 23070 I2

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