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 I. Introduction and general notes

Collection:: Economics Books

INTRODUCTION AND GENERAL NOTES I: be. At the same time with due regard to the share in the general prosperity to which the owner of the utility is entitled, he should be allowed to earn more than ordinary interest on his investment and a capitalization of any such excess earnings when these are fairly assured will furnish him with a basis for approximating the sum of all intangible values of whatever nature. Amortization and Depreciation. — A clear distinction should be made between the amortization of capital that is invested in any enterprise and provision for depreciation or the replace- ment of perishable elements. The sinking fund for the retire- ment of bonds, or other debt, should not, in other words, be confounded with the fund usually referred to as the “ deprecia- tion ”’ fund which is intended to meet the replacement require- ments as they arise. Valuation for Purchase or Sale. — In appraising for a sale, various matters are to be taken into account which are of minor importance when rates are to be fixed. If the accrued de- preciation has actually been allowed in the earnings and has been permitted to accumulate in a fund, and if the accumulated fund properly represents the accrued depreciation, and is a part of the property to be transferred, then the appraisal in- cluding this fund should be in substantial agreement with the legitimate investment. If, on the other hand, there is no de- preciation fund, if the earned and collected adequate depre- ciation allowance in excess of the expenditures therefrom for replacements has been absorbed for other purposes by the owner, then a purchaser would make the depreciated value or the legitimate investment less depreciation his starting point in determining the amount which a plant is worth, because in purchasing the property he assumes an obligation to replace perishable parts as they go out of use. If the plan is followed of allowing earnings which will meet all replacement require- ments together with interest on the full investment, without deduction for depreciation, then a purchaser in view of the assured return will make the legitimately invested capital i)

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