Valuation, depreciation and the rate base

Bibliographic data

Monograph

Identifikator:: 174667931X

URN:: urn:nbn:de:zbw-retromon-119897

Document type:: Monograph

Author:: Grunsky, Carl Ewald http://d-nb.info/gnd/10180959X

Title:: Valuation, depreciation and the rate base

Edition:: 2. ed., revised and extended

Place of publication:: New York

Publisher:: Wiley

Year of publication:: 1927

Scope:: X, 500 Seiten

Digitisation:: 2021

Collection:: Economics Books

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

Chapter

Document type:: Monograph

Structure type:: Chapter

Title:: Chapter V. Elements which reduce value

Collection:: Economics Books

ELEMENTS WHICH REDUCE VALUE ) It is noteworthy in the assumed case of a plant which has attained full growth and is made up of numerous parts that, when the replacement requirement is computed from the begin- ning by the compound interest method, the amount in the re- placement fund should theoretically vary between comparatively narrow limits; at 6 per cent interest from 31 to 40 per cent for life terms ranging from 5 to 40 years. But in reality there can never be absolute agreement between the actual useful life and the probable life of all parts of the plant. The formule noted in this chapter are not therefore strictly applicable. They are nevertheless valuable in illustrating a principle. Application of Earnings to Replacement and Amortization. — The demands upon the replacement fund usually begin long before the end of the probable life term is reached and may be quite irregular in amount. The non-existence of a replacement fund in the full amount indicated by mathematical and theo- retical consideration does not, therefore, prove that the defi- ciency has been distributed as profit, nor yet that there has been any waiver of the right to have the earnings cover a fair replace- ment increment. Furthermore, if the earned annual replacement increment be treated as amortization of capital and be immediately applied for this purpose, it will thereby be removed from all further consideration. The interest on any increment thus applied is not available to retire more capital. Treated as an annuity and remaining in the business, interest may be compounded so long as the fund is held for its intended purpose, that is, for retirement of capital at the end of the useful life of the item which is being retired. Interest ceases to accumulate the mo- ment the fund is applied to retire the investment in whole or in part. Consequently, if a uniform annual amortization incre- ment bearing interest compounded annually be determined from amortization tables based on the probable life of a new article and if it be covered by the earnings from year to year, even though the amortization increment as earned be reinvested in the property, it cannot rightfully be classed as a repayment of 05

Access restriction

Copyright

fullscreen: Valuation, depreciation and the rate base

Monograph

Chapter

Table of contents

Download

Monograph

Chapter

This page

Image fragment

Citation links

Citation recommendation