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

THE VALUATION OF MINES AND OIL PROPERTIES 243 It is a fact that industrial enterprises because of additional risks demand greater interest returns than Government bonds and it seems reasonable that mining investments taken as a class should call for a greater rate of interest than industrial enterprises. This claim for a higher rate of interest is opposed by such an authority on mine valuation as Mr. J. R. Finlay * who can be quoted as follows: “ Ihave generally assumed that 5 per cent was a normal inter- est — or discount rate. If that is so, it is a fair figure to use in a mine valuation, which should be nothing but a candid inquiry into the present value of expected profits.” If Mr. Finlay’s statement is correctly understood, he is willing to ignore the risk that these prospective profits may be dimin- ished or may entirely be cut off before the estimated life of the property has been accomplished. If it is true that at any min- ing property risks exist over and above the risks existing in so-called “safe” investments, then a 5 per cent discount or interest rate is not sufficient to induce sane investment. Mr. Finlay’s 5 per cent interest rate, as applied to the iron mines of Michigan in his appraisal made for the State Tax Commission in 1911, was changed by that Commission to a 6 per cent basis in 1913. Other authorities have gone on record as advocating higher interest rates and in this connection the following will be found of interest: Mr. J. H. Curle | states that a suitable mining investment must fulfill the following requirements: “ 1st. The development in the bottom must be good; “2nd. The mine must pay 10 per cent per annum; “ 3rd. There must be 60 per cent of the price of the shares in sight.” Mr. Hoover in his admirable work on mine valuation says: } * J. R. Finlay, “Valuation of Iron Mines,” Trans. A.LM.E., Vol. 45, P- 295. t J. H. Curle, “The Economist,” London, Sept. 15, 1903. I H. C. Hoover, “Principles of Mining,” 1909.

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