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

Collection:: Economics Books

182 VALUATION, DEPRECIATION AND THE RATE-BASE throughout the probable life term of the pump for each $100 of its cost. The agreement will provide that he gets this sum annually so long as the pump remains an efficient appliance and that the payment shall cease as soon as the pump becomes use- less. The present value of this pump to Jones for each $100 of its cost, at any time of its life, will be the present value of an annuity of $7.82 for the expectancy or remaining life of the pump. This will be true if he is under no obligation to replace it and if scrap value be disregarded. When the pump is new, the probable life or expectancy is 25 years and the present value will be roo per cent. When the pump is 10 years old, its expectancy may be about 17 years and the remaining value at that time $82 for each $100 of first cost or 82 per cent. When the pump is 25 years old and still in good condition, its expectancy may be about g years and the remaining value of each $100 of original cost at that time would be the present value of an annuity of $7.82 for g years or $53 or when compared with the total original cost, 53 per cent thereof. If the pump is defective or is put out of service by some accident before it has served 25 years, Jones will be a loser. If it serves beyond the term assumed as the limit of its usefulness or beyond 25 years, Jones will be the gainer. If Jones is in the business of supplying pumps in large numbers on these terms he will find, if probable life has been correctly determined, that his capital is yielding 6 per cent per annum. Further Comparison of Methods with Tables and Diagrams. — A further comparison of the various methods of procedure which have found favor when rates for the output of public service properties are to be fixed, is given in the following pages with tables and diagrams where practicable. These comparisons are strictly theoretical and are based in each case as noted on the impossible assumption that the actual life of every item which goes to make up the property will coincide with the prob- able life of that item. The comparison nevertheless shows where these methods, if consistently applied from the beginning, would

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