Valuation, depreciation and the rate base

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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

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Document type:: Monograph

Structure type:: Chapter

Title:: Chapter IX. Possible procedures when the rates for a public service are to be fixed

Collection:: Economics Books

180 VALUATION, DEPRECIATION AND THE RATE-BASE Theoretically there would be no accumulation in the replace- ment fund because in the case of numerous articles the annual demand on the fund would be offset by the replacement allowance. The simplicity of the Unlimited Life Method, as well as its advantage in requiring least earnings in the early years, appears from a comparison of such accounts as above presented. Before leaving this subject attention may be called to the fact that the balance which these figures show to be probable in a replacement fund under the Sinking Fund Method of pro- cedure and the amount of the amortization under the Equal Annual Payment Method do not agree with what would be found on the impossible hypothesis that all articles serve through- out their probable terms of usefulness and no longer. On this purely hypothetical assumption (see page 94) the fund should contain about 38 per cent of the cost of the depreciating articles after five years of operation (5 years probable life being here under consideration). If the various methods of procedure and fixed rules of account- ing are closely adhered to and a comparison of results be made at the end of the tenth year, numerous articles all having a probable life of 5 years being under consideration, the results in so far as the amount of amortization or the amount in the re- placement funds are concerned should be about as follows: On the hypothetical assumption of agreement between actual and probable life, and an amortization allowance estimated by com- pound interest methods, the original invest- ment should have been reduced by about. . 38 per cent By the Sinking Fund Method, if the replace- ment allowance continues during probable life, the amount in the replacement fund should be about........ . RT. ss per cent By the Sinking Fund Method, if the replace- ment allowance continues during the actual life, the amount in the replacement fund should be about... -.. hl leblesitt LL. 24 per cent

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