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

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Document type:: Monograph

Structure type:: Chapter

Title:: Part III. Capital and income

Collection:: Economics Books

232 NATURE OF CAPITAL AND INCOME [Cmar. XIV re that no product can be obtained until the end of ten years. We may suppose that then the yield is worth $1000 a year during the ensuing (second) decade, after which it will be worth $2000 a year forever. It may be shown that the present value of the forest, reckoned on a five per cent basis, is about $20,000. This would be the discounted value of an annuity of $1000 a year, whose commencement is deferred ten years from the date of investment, and which then runs ten years, plus the discounted value of a perpetual annuity of $2000 a year beginning twenty years in the future. On the five per cent basis, the forest will, in ten years from the present, be worth about $32,000 (this being the discounted value of an immediate ten-year annuity of $1000 followed by a perpetuity of $2000). Twenty years from the present, the forest will be worth $40,000 (this being the discounted value of $2000 a year forever). The forest land therefore rises gradually in value from $20,000 to $32,000 in the first decade, during which no income is realized, and continues to rise, though less rapidly, to $40,000 in the second decade, during. which there is realized the comparatively small income of $1000 a year. The rate of return, therefore, at the beginning, being the quo- tient of the income realized divided by the capital, is 55, or zero. The rate of return evidently remains zero through- out the first decade. At the beginning of the second decade the rate is evidently 2% or 3.1 per cent; at the beginning of the third decade it is Af, or 5 per cent. We see, therefore, that in this case the rate of value-return gradually rises from zero to a height equal to the rate of interest. There may even be a negative rate of return. A colt, for instance, may occasion more trouble than it is worth for the first year, and produce a net expense or disservice of $20. Thereafter it may render a net income of $10 during the second year, $20 during each year from the third to the tenth inclusive, and $10 a year the next five years, after which it dies. Supposing, as our preliminary hypothesis

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