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

244 VALUATION, DEPRECIATION AND THE RATE-BASE “ What rate of excess return the mine must yield is a matter of the risks in the venture and the demand of the investor. Min- ing business is one where 7 per cent above provision for capital return is an absolute minimum demanded by the risks inherent in mines, even where the profit in sight gives warranty to the return of capital.” Mr. G. A. Denny, an English engineer, says: “ A normal mining risk stated in terms of interest may be taken at 10 per cent per annum on the capital expended plus a rate for the redemption of capital.” John Hays Hammond { expressed his views on this question as follows: “ In many mines persistency of the ore deposits and, therefore, the reliability of the mines as dividend payers, justified the in- vestment upon a basis in some instances as low as 8 per cent, dividends to which, of course, must be added a certain per- centage to provide for the amortization of the capital. Gener- ally speaking, however, investments in mining securities are not to be regarded as attractive unless they return from ro per cent to 15 per cent in dividends, in addition to the profits to be set aside for amortization.” Price of the Mineral Product. — Because of wide fluctuations in the prices that minerals bring in the market, the use of the current market price of such a product in measuring the value of a mineral deposit is not proper for valuation purposes in general. No hardship would be forced on the owner or operator if, for taxation purposes, valuations were made annually based on the current price of the mineral produced. This method, however, results in a valuation fluctuating in amount from year to year and because of the constant changes required, does not seem to be practical. The “normal” price of a mineral may be defined as the aver- age market price over a certain definite period of years. Periods of time five or ten years in length are in general use. The * G. A. Denny, Mexican Mining Journal, July, 1910. t John Hays Hammond, Engineering and Mining Journal, Jan. 1, 1910.

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