ESSENTIALS OF VALUE . 
No compensation for hazard or management is included in the 
foregoing figures. The property as assumed will yield more 
than operating expenses after the first five years. Unless the 
excess over operating expenses is more than 6 per cent on the 
total outlay of $1,438,220 the owner will still be conducting 
business at a loss and unless it is sufficiently in excess of 6 per 
cent to compensate him adequately for management and risk 
he will not realize all that he had a right to expect. 
By reason of increase of population increased demand for his 
output, or for the service which is rendered by the utility it 
may be possible after the first five years to reproduce the utility 
or to construct a substitutional plant with established business 
at a less cost than $1,438,220. 
The question is how to determine what will be fair earnings. 
Two procedures are open: 
a. The actual cost of developing the business may be added 
to the cost of reproducing the physical plant and the sum ap- 
proximating $1,438,220 may be introduced into the calculation 
as the rate-base. 
b. The cost of reproducing the physical plant together with 
actual cost of franchises, water-rights or rights-of-way or about 
$1,000,000 is made the rate-base, and the cost of developing the 
business, in this case approximately $438,220, is estimated and 
treated as a business loss subject to amortization in a reasonable 
number of years. 
Any allowance less than will result from these procedures 
would be confiscation of a part of the investment and therefore 
unfair to the owner, who is in this illustration assumed to have 
used good judgment in undertaking and developing the enter- 
prise. 
Kennebec Water District Case on “ Going Concern.” — In 
this connection, too, the instructions issued by the court in the 
Kennebec Water District Case to the appraisers of the Maine 
Water Co. (97 Main 185; 54 Altantic 6) may be cited: 
“In estimating even the structure value of the plant, allow- 
ance should be made for the fact, if proved, that the company’s 
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