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

Collection:: Economics Books

304 VALUATION, DEPRECIATION AND THE RATE-BASE present-day conditions may be of service in segregating ‘ going value.” But when earnings are to result from rates yet to be fixed the case is somewhat different, and the question will arise whether the relation between cost of development actual or hypothetical, however ascertained, is a safe guide to the “going value’ which should be created by the profits of the business in excess of interest on the invested capital. Intangible values of whatsoever nature result from high earnings. They include not only “ going value,” but also in some cases water-right values and whatever may be included in such terms as ‘ franchise value,” ‘ good-will,” and the like. Such values do not exist unless the rates are higher, as the writer has elsewhere pointed out they should be, than would produce net earnings equaling the return ordinarily expected from money loaned for use in similar enterprises. The difficulty of using a hypothetical reproduction of an existing utility property, as a means of estimating the cost of developing the business, is apparent from the following considera- tion. The comparative plant is assumed to be an exact repro- duction of the existing plant. There is no competition between the two plants. It might be assumed that the moment that the comparative plant is completed, it will be in full service at the same earning power as the established plant. There would then be no appreciable development period. If such a period is admitted it implies a lack of completion of the comparative plant or the development period should be measured only by the time that it would take the consumer to put himself in position to avail himself of the service. The market in such a comparison is assumed to be at hand. The expert who resorts to this method of estimating going value will give his judgment wide latitude, and his conclusions are not apt to be convincing. Cost of Establishing Business is Not Going Value. — It is well to bear in mind, however, that if a community which is served by a public utility had undertaken the establishment of this utility as a public enterprise it would have been subject to the same and perhaps greater costs in developing the local business

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