Valuation, depreciation and the rate base

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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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Document type:: Monograph

Structure type:: Chapter

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

Collection:: Economics Books

ELEMENTS DESERVING SPECIAL CONSIDERATION 297 suggested and which is novel, should appeal to all concerned as logical and in accord with the common practice in ordinary business affairs of allowing commissions based on the magnitude of the involved transaction. To summarize: — No argument seems to be required to prove the owner’s right to compensation for management. This compensation cannot be brought into any definite or satisfactory relation to what the author believes should be designated as the natural rate-base, being the legitimate invest- ment, usually determined from recent investment and cost of reproduction including an allowance for cost of developing business but without deduction of depreciation, because the amount of business bears no definite relation to the amount of capital invested. If this compensation is brought into some relation to value (including in value the going value of the concern), then the reasoning will be in a circle and the proceeding will be illogical and absurd. It will always be fair to both the owner and the rate-payer to let this compensation be brought into a proper relation to the gross income. The owner's share in the general prosperity of the community, under the customary procedure of the rate-regulating authorities, is recognized in those cases in which the utility plant includes property which is appreciating in value. There may be some unearned increment, in addition thereto, concealed in the allow- ance for “ going value ”” and in a rate of return in excess of the cost of borrowed money, but so long as one concern gets the unearned increment in large amount, due to increasing values of real estate and other concerns apparently get none, the system will be at fault. The participation in general prosperity should, therefore, also be brought into relation to the volume of business and not to a rate-base. The business hazard is contingent in part on the amount of

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