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

ELEMENTS DESERVING SPECIAL CONSIDERATION 305 than the costs which were incurred by the owner of the property. The losses in the early years, on the same chances that there would be loss, would have confronted the public as it confronted the private enterprise. The cost of establishing business is, therefore, an element apart and while perhaps in some measure and under a multiplication of facts relating to many enterprises, the cost of establishing business may be some guide to what the normal going value should be, it will be more logical to treat this cost either as a part of the capital legitimately in the enterprise, or taking the other extreme, as a business loss to be amortized out of earnings within a reasonable time. While the costs of establishing the business, including early losses and expenditures for unsuccessful work, are not a direct measure of going value, they are, nevertheless, in so far as they were legitimate, of that class of expenditures which should, as already stated, come back to the owner of the property sooner or later. The mere knowledge that this is the case, or the prob- ability that the owner will some time recover them, adds value to the property. To add them in the exact amount shown by the cost records in any particular case would not, invariably, be a fair procedure. The owner who builds with care and under the best expert advice, and who pushes his work forward as rapidly as the market to be served will justify, and who enters immediately upon a profitable business without any lean years, is entitled to a reward for his able management and the success of his enterprise. The “ going concern value ” of a plant con- structed under such favorable circumstances is as great as the ‘ going concern value ”’ of other plants of a similar character but burdened perhaps with large expenditure for unsuccessful work and for the development of business. The combined experience of all utilities of similar character should in the long run establish the addition which should be made to the earnings, either to amortize a fair allowance for this class of expenditures in a reasonable time or to provide an ade- quate return thereon if treated as investment or as an increment of the value of the going concern. In the light of this conclusion

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