ELEMENTS DESERVING SPECIAL CONSIDERATION 307 
“ Going Value ” the Result of Earnings. — It is apparent from 
what has above been stated that * going value ”’ and the value of 
physical properties are elements apart; between which, in other 
words, there is no definite relation. ‘ Going value ” then is 
not dependent upon the capital which is invested in any property. 
And yet ‘“ going value ”’ grows with the business enterprise. It 
is subject to appreciation. This suggests that when once the 
“going value” is determined which efficiently managed enterprises 
of various kinds should ordinarily have, this value can be brought 
into some relation to the volume of business. This thought has 
heretofore been advanced by the author and by others who are 
contending that it would be fair to allow a ‘‘ going value ” about 
equal to one year’s income to be created by adequate earnings. 
On this point the late Mr. Leonard Metcalf, a consulting en- 
gineer of large experience in valuation matters, in the recent 
Spring Valley Water Company rate case, said: 
“In terms of gross annual revenue, development expense is 
found to be approximately equal to one year’s gross revenue as 
of the date of valuation, in the case of ordinary waterworks 
properties of medium and small size, and between one and one 
and one-quarter times the gross annual revenue in the case of 
the larger properties — the cumulative interest during construc- 
tion charges incident to the long period of construction involved 
in the building of the larger works being accountable for the 
difference.” 
Bearing on this same subject the author, in a paper read in 
1912 before the American Society of Civil Engineers, said: 
“ The most logical course to be pursued, and the one which is 
always open to the appraiser ”’ (rate-fixing authority) “is to use 
the best available means for determining the amount of capital 
which is properly invested, then to determine what the earnings 
should be to yield an ordinary return on the investment thus 
ascertained, and then to increase these earnings by an arbitrary ” 
(reasonable) ‘“ amount, which may vary within wide limits, not 
only to compensate for past losses and for the hazard during 
construction and operation, but also as a compensation for 
management.” And again: ‘“ Any addition to the rate of