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 17 procedure, even with the assumption of agreement between actual and probable life, this will not be the case. A full dis- cussion of this fact would be superfluous, but it is here stated as a caution against a possible erroneous assumption. * However, in view of the fact that the termination of service or failure of any article does not occur at the exact end of its probable life term, there would be no sense in attempting to establish the remaining probable life for group values unless hard and fast appraisal rules are laid down by those charged with the regulation of public utility rates coupled with adequate assurance that such rules will be adhered to. The Assumed Hypothesis of Failures. — It may be repeated that the foregoing Tables 4 to 7 are based on the hypothesis that failures of any group of articles of the same probable life will be most numerous near the end of the probable life term; that there will be a gradual uniform increase in the number of annual failures from the beginning to the end of this term; and that but few, if any, of the articles will have a life in excess of double that of the probable life of the article new. It may be repeated, too, that this hypothesis is not based on adequate experience, that it probably departs further from aver- age results than would be found under strict adherence to the law of probabilities, which is the basis of Table 1 3, and that it remains subject to modification as experience may determine. Until suitably modified, it offers, however, a better means of approximating remaining value of any article than is afforded when calculations are made from probable life tables without regard to the condition of the article at the time of the valuation. Failures and Expectancy according to the Law of Probability. — A study has been made, as already stated, to see where the law of probability would lead, and the result of the comparison will be of interest. * The remaining life of an equivalent single article, when computations are made by the Sinking Fund Compound Interest Methods, is noted in a paper in Transactions American Society of Civil Engineers, Vol. XXV, p. 836, with ex- amples on a 4 per cent interest basis. int

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