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 VI. The effect of non-agreement of actual with probable life upon the determination of the depreciation or replacement requirement

Collection:: Economics Books

ACTUAL AND PROBABLE LIFE 1 If the reasonableness of the assumption on which Table 3 Is based be admitted, or if it should be possible to prove by actual records of failures that these assumptions are near enough to the truth to be accepted as giving results substantially correct, then a further analysis will show that the actual replacement requirements under various conditions of investment will be as shown in Tables 4 to 6. In the preparation of these tables account has been taken of the failures that will occur among the replacements as well as among the units of the original installations. Diagrammatic Illustration of the Assumed Rate of Failures. — The basis for the results in Table 3 for articles with a probable life of ten years is shown diagrammatically in Fig. 1. The expectancy is found by dividing the remaining service years at any time by the corresponding number of surviving units. The reversed curve marked “Articles remaining in service ” clearly indicates the hypothesis of failures on which the table is based. It is to be noted that under this hypothesis there is no serious departure from the results that were obtained by assuming that the law of probabilities would apply. Tabular Presentation of Replacement Requirements for Groups of Articles. — The replacement requirements, as shown in Table 5, for numerous articles which when new have a probable life of ten years, if failures occur substantially as as- sumed, and if each failing article be at once replaced, would increase from $1 in the first year to about $10 in the ninth year for $100 of original investment, fluctuating thereafter be- tween $9 and nearly $12 per year and gradually settling down to $10 per year. For an annual investment of $100 per year (i.e., for a growing plant), the replacement requirements would gradually increase from $1 per year in the first year to $463 in the fiftieth year, or from $1 per $100 of investment in the first year to $6.01 in the tenth year to $8.16 in the twentieth and to $9.27 in the fiftieth year. In practical application, in other words, the annual replace- ment requirement in the case of a plant of full growth all parts XR

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