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 : enth, 8oo at the end of the twelfth, and so on to the last 100 at the end of the nineteenth. By substituting dollars for articles and computing the annuity at 6 per cent interest required for the replacements of each year it will be found that an annuity of $94 will be required to replace the failures of the first year, an annuity of $97 to re- place those of the second year, an annuity of $94 to replace those of the third year, an annuity of $91 to replace those of the fourth year, and so on to the nineteenth year. The sum of these annuities is $1101 or 11.01 per cent. If the articles which fail each year are replaced and the re- quired annuities for these replacements are also taken into account then the sum of the annuities at 6 per cent interest will be: 11.01 per cent the first year, 10.17 per cent the second, 9.41 per cent the third, 8.78 per cent the fourth, 8.26 per cent the fifth, 7-86 per cent the sixth and so on to a minimum in about the fourteenth year of a little over 7 per cent, and thereafter grad- ually increasing to about 11 per cent in the thirtieth year. Had the determination been made in the usual way, based on the assumption that no distinction need be made between the actual and the probable life, the allowance for replacements would have been 7.59 per year, continuously from the beginning. Conceding a moderate or even a wide range of error due to an almost arbitrary though reasonable assumption of the probable annual failures when average life is known, the result of the computation of what should be set aside annually on the annuity basis, to meet the replacements, when compared with the an- nuity determined from probable life new, shows that the latter is insufficient. The computation also shows that the required earnings based on this determination would be undesirably high at the begin- ning, in the early years, when they should be low. No further demonstration than the above will be needed to show the futility of depending on the Sinking Fund Method and the Equal Annual Payment Method as usually applied, when estimating the replacement requirements. I271

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