CHAPTER VII 
THE PURPOSE OF THE APPRAISAL 
General Statement 
Various Purposes of Appraisal. — The owner of an operating 
property is interested more in knowing what it has cost him 
than he is in the value of the property, until the time comes 
when a transfer of ownership is to be made or the business is 
to be capitalized. Generally, however, when any enterprise of 
considerable magnitude is involved the owner should, at all 
times, have a clear conception of its value. This can only be 
obtained by making the analysis of the investment and of oper- 
ating expenses in relation to revenue, and involves much more 
than a study of financial records. The condition and adapta- 
bility of a plant to the uses to which it is being put are involved 
and must be considered by the appraiser. Valuation, therefore, 
may be required: 
a. As a basis for a purchase and sale transaction. 
b. When the property is to be pledged as a security for a loan 
or as the basis for a bond issue. 
¢. When the rates of a public utility are to be fixed or regu- 
lated, because the earnings resulting from the rates should be 
adequate to bring a suitable return on the investment and be- 
cause the charge for the service should be reasonable. 
d. As a basis for taxation. 
The taxation value bears or is intended to bear some definite 
relation to market value. This is not only true in the case of 
ordinary taxation, for the purpose of carrying on government, 
but also in the innumerable cases in which it becomes neces- 
sary to apportion to the property which is benefitted, the cost of 
some improvement in proportion to the benefits which it confers. 
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