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 Appraisals as a Basis for Fixing Rates Protection of the Investment. — In determining the invest- ment on which the investor in public service properties should be allowed a reasonable return, all attendant circumstances must be duly considered. It may be stated, however, that, apart from the determination of the rate of interest which should result from the investment, it will be equitable and fair to con- sider the public service corporation as the agent of the State or municipality, as the case may be, and to determine in what situation the State or municipality would have found itself had there been no intermediate owner or public service corporation. Let it be assumed that the owner of a public service plant has made his investment under good expert advice, and that the plant is in every respect the same as, or equal to, what the people would have constructed for themselves. Let it be fur- ther assumed that the plant is free from debt, that it will have no residual value, and that it and all its parts will have an actual useful life of # years. The owner will then be entitled: First. — To a reasonable interest on his investment; Second. — To operating expenses; including maintenance, re- pair and replacement expenditures; Third. — To an annuity which, in » years, at compound in- terest, will amount to his investment; Fourth. — To reasonable compensation for managing the busi- ness which may be based on the volume of business transacted, and on the general prosperity of the community. Purpose of the Accumulating Replacement Fund. — If it be now supposed that the owner actually received these amounts, estimated on a proper basis, and that he allows the annuity at compound interest to accumulate so that amortization will be an accomplished fact at the end of # years, then, as he has command of the amortization fund, he will have a decreasing amount of capital actually tied up in the plant. This decreas- ing capital or remaining value of the plant is the complement of the growing amortization fund. This fund, in the case of a 127

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