The nature of capital and income

Bibliographic data

Monograph

Identifikator:: 102659555X

URN:: urn:nbn:de:zbw-retromon-82920

Document type:: Monograph

Author:: Fisher, Irving http://d-nb.info/gnd/118533541

Title:: The nature of capital and income

Place of publication:: New York

Publisher:: The Macmillan Company

Year of publication:: 1923

Scope:: XXI, 427 Seiten

Digitisation:: 2019

Collection:: Economics Books

Usage license:: Get license information via the feedback formular.

Chapter

Document type:: Monograph

Structure type:: Chapter

Title:: Part III. Capital and income

Collection:: Economics Books

Sec. 5] VALUE OF CAPITAL 209 which is supposed to be the rate,at which water will flow through an aperture of one square inch with a “head” of six inches. The “first’’ inches are often so sure to con- tinue as to be guaranteed. Again, if we overlook the element of risk, the hares in joint stock companies often exemplify perpetual annuities. Turning from capital proper y to capital wealth, we find in land an approximate example of capital yielding a per- petual annuity. Land is often capitalized on the basis of a perpetual and uniform income, in the form of erops or other uses. It is then valued at a certain number of years’ pur- chase. These so-called “natural and indestructible powers . of the soil,” however, which such a calculation assumes, do not always exist, and when they do exist, do not always yield a perpetual annuity. Mines and quarries become exhausted, while much land yields an irregular, increasing, or decreasing income stream. $5 We turn now from perpetual to terminable annuities. Suppose that a man possesses a ten-year annuity of $100 a year. Thismeans that he hasthe right to receive ten annual payments of $100 each, the first falling due one year from the present moment. It is clear that such an annuity differs from a perpetual one by lacking the infinite succession of payments after the ten years are past. In short, the terminable annuity is simply a perpetual annuity dated to-day, less a perpetual annuity deferred ten years. There- fore, the present value of the terminable annuity is simply the difference between the present value of the two perpet- ual annuities. Of these two perpetual annuities, the pres- ent value of the one which begins immediately, interest being four per cent, is $2500, and that of the one which is deferred ten years is gas, or $1689. Their difference is $2500 — $1689 or 811. Now such a difference as this, i.e. the difference between any particular sum (as $2500) and P

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