ACTUAL AND PROBABLE LIFE )
wiped out the entire cost of others still in service, which judged
by the accounts should have no value.
Effect of Expectancy upon Present Value. — In order to
weigh the advantages and disadvantages of these methods in
their practical application some attention must now be given
to the probable life and to the expectancy of the various ele-
ments that go to make up a public service property.
When it is desired to know the present value of any article,
the question is not “ how old is it and what did it cost?” but
“ how much longer will it serve and what will it cost to replace
it”. The first question might be asked when the accrued amor-
tization of capital is to be estimated. The second question is
to be answered when the current depreciation or the current
replacement requirement are to be estimated.
How then shall the expectancy be determined?
All estimates of annual depreciation and of accrued depreci-
ation are based on premises which cannot be determined with
accuracy. The probable life of any article when new and the
life expectancy of any article which has been in use for some time
cannot be determined with any great degree of precision. Conse-
quently estimates of depreciation are only approximations.
Academic Discussion Justified. — There is much uncertainty
in such estimates under the ordinary conditions under which
public utilities are operated. A wide range in the method of
making the estimates has been the result. When, therefore,
the correctness of methods is under discussion, this difficulty of
making close estimates should not be lost sight of. Neverthe-
less, the academic discussion which is being indulged in by the
engineer and the economist relating to best and most convenient
methods of procedure is justified, because the same will lead to
an ultimate standardization of methods and finally to the gen-
eral adoption of the most convenient and generally best method,
fair to both the rate-payer and the owner.
Although this limitation be recognized as well as the uncer-
tainties that result from imperfect knowledge relating to the
actual and to the probable life of the elements of any public
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