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

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Chapter

Document type:: Monograph

Structure type:: Chapter

Title:: Chapter XV. Elements deserving special consideration when rates are to be fixed

Collection:: Economics Books

200 VALUATION, DEPRECIATION AND THE RATE-BASE in vain in such a case to attempt a regulation of rates based solely upon a fair return upon the invested capital. The whole field must be brought into view. The volume of business transacted is, in such a case, equally as important an element for considera- tion as is a rate-base when a limit is to be set upon the earnings. An express company, as here assumed, has no appreciating property. Its share in the unearned increment of the country should be brought into some relation to the amount of service which it renders, that is, to the volume of its business. The compensation for management likewise is intimately related to and should be figured with the volume of business as the starting point. It would, of course, be quite as feasible to start with the total cost of operation instead of with the gross annual receipts when determining what should be allowed for management and what should be allowed to cover participation in general prosperity, but the gross income as a basis has obvious advantages. Book- keeping will be simplified and the control is more readily effected. The annual cost of operation will be more difficult to ascertain and will show greater relative fluctuations than the annual gross income, and for the same allowance in the earnings, the per cent of the annual gross income will be less than the per cent of the operating cost, thus resulting in greater stability of the percent- age allowance when once fixed. From the standpoint of the public, there can be but little question that the compensation for management should, as here suggested, be brought into fair relation to the volume of business instead of making its appearance in the interest allowance on an arbitrarily established or assumed * going value.” No basis has yet been discovered for estimating “ going value ” except capitalization of net profits. When, therefore, ¢ going value ” deduced from the opinion of experts, supported chiefly by assump- tions, as distinguished from cost of developing business, is in- cluded in a rate-base, the procedure must appear illogical to the rate-payer and will always remain subject to attack, both as to principle and amount. The alternative procedure which is now

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