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.

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Document type:: Monograph

Structure type:: Chapter

Title:: Chapter XIII. The valuation of mines and oil properties

Collection:: Economics Books

THE VALUATION OF MINES AND OIL PROPERTIES 241 mination of all the elements that have a bearing on the values is necessary. The estimated profits capitalized furnish the foundation for a valuation of the ore bodies or deposits. These profits are dependent on the sales value of the product, the geological structure of the deposit, the cost of mining (present and future), the cost of surface treatment, and other factors. In fixing the value of coal lands use can be made of the foot- acre ” method of valuing coal lands provided account is taken of the fact that a foot-acre of coal in a thin vein is not so valuable as it is in a thick vein. The sales of adjoining properties will be of assistance to the engineer in fixing a value, particularly in case of coal lands which have not been explored but which con- tain the same beds and show geological conditions similar to properties that have recently changed hands. The © royalty value ”” should not be ignored and when properly determined furnishes a valuable check on the valuation. When account has been taken of the risks of operation, the geological features of the deposit and the economics of the necessary surface plant, the total prospective estimated profit can be suitably discounted and a certain definite valuation placed on the property. In determining the present value of a property for which the profits have been estimated, it is necessary to remember that certain fixed charges such as replacements, sinking fund payments (paid or not paid), etc., are to be deducted before the profits are capitalized. A mining property to be a good investment must promise to an investor the return of his capital in addition to interest on the capital at a rate commensurate with the risk he takes in investing in such a property. What the risk will be should be determined by the investor before he makes the investment. Comparison of the proposed investment with certain standard investments such as government bonds, railroad bonds and real- estate mortgages should be made. Proper Rate of Interest. — The proper rate of interest on mining investments has been and still remains the subject of much discussion among engineers. A reasonable solution of

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