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 XIII. The valuation of mines and oil properties

Collection:: Economics Books

240 VALUATION, DEPRECIATION AND THE RATE-BASE valuation has been applied to some extent in coal regions. Because coal becomes more valuable from year to year the value of a leasehold will increase. The annual profits exceed the royalties by continuously increasing amounts and a valua- tion based on the average royalty payments in a district cannot be a gauge of the actual values, particularly districts where the leases have been in effect for some length of time. In addition to the value of the mine or colliery determined from royalty values, the leasehold itself has a value which increases as the value of the mineral product goes up and the actual value of the property must be the summation of these two values. As the leasehold value is determined by subtracting the valuation based on royalty values from a valuation of the property, itself, by some other method, it is evident that the royalty value method cannot be independently used to determine the value of the property. (4) Valuation by Capitalizing Profits. — By this method the valuation is based on a capitalization of the net annual profits. It requires an estimate of the remaining life of the property but does not take into account the fact that incompetent manage- ment may so deplete the profits that a valuation with these as a basis may not approximate the actual value of the property in competent hands. This method should only be adopted when estimated profits instead of actual profits are used as a basis. It is then appli- cable in the case of oil properties and other deposits the extent of which is indeterminable. If the life of adjoining or neighbor- ing properties has been proven, an approximate basis may be had for estimating the life of the property which is to be valued. The depths to which mineralization extends in neighboring mines often is used to determine the expectation of a prospect when such information supplements the geological features of the deposits. (5) Valuation by Estimation Method. — This method is adopted by mining engineers in the valuation of mineral prop- erties when these are to be bought, sold or financed. Deter-

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