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 VII. The purpose of the appraisal

Collection:: Economics Books

THE PURPOSE OF THE APPRAISAL 125 sive salary payments, for unprofitable or useless expenditures and losses by accident. When cost cannot be thus ascertained or whenever there is a doubt and the importance of a close ap- proximation warrants such procedure, the cost of reproducing the property is to be estimated. Proper allowance must be made, too, for all expenses of whatever nature connected with construction and with the establishment of the business. Second Step — Deferred Maintenance and Depreciation. — The second step will be to ascertain the deferred maintenance, if any, and the accrued depreciation. The accrued depreciation will be the difference between the cost of reproduction new and the present or remaining value of the items which make up the property and which are subject to depreciation. Third Step — Cost of Operation. — The third step will be the determination of the cost of operation. According to the na- ture of the business this may be directed to the aggregate out- put of commodities or service, or it may cover a segregated analysis of cost of operation for a variety of services or commod- ities. But the essential fact to be ascertained is the total out- lay including interest on the investment, salaries and wages, supplies, maintenance and repairs, current depreciation or re- placement requirements, and in the case of a franchise, or patent right with a limited life term, or in the case of an oil well or a mine with a limited oil or ore body, including also an amortization increment. Fourth Step — Earnings, Present and Prospective. — The fourth step will be the determination of the earnings, current and prospective, that will result from such charges for service or for the commodity as may reasonably be assumed to be proper and dependable. It is here, in the case of the public utility, that there may be much uncertainty due to the difficulty of fore- casting the attitude of the rate-regulating authorities toward the public service corporation. For while it is true that private property may not be taken for public use without due process of law and that there must be no confiscation through inade- quate earnings, there is yet some uncertainty relating to the

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