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 307 “ Going Value ” the Result of Earnings. — It is apparent from what has above been stated that * going value ”’ and the value of physical properties are elements apart; between which, in other words, there is no definite relation. ‘ Going value ” then is not dependent upon the capital which is invested in any property. And yet ‘“ going value ”’ grows with the business enterprise. It is subject to appreciation. This suggests that when once the “going value” is determined which efficiently managed enterprises of various kinds should ordinarily have, this value can be brought into some relation to the volume of business. This thought has heretofore been advanced by the author and by others who are contending that it would be fair to allow a ‘‘ going value ” about equal to one year’s income to be created by adequate earnings. On this point the late Mr. Leonard Metcalf, a consulting en- gineer of large experience in valuation matters, in the recent Spring Valley Water Company rate case, said: “In terms of gross annual revenue, development expense is found to be approximately equal to one year’s gross revenue as of the date of valuation, in the case of ordinary waterworks properties of medium and small size, and between one and one and one-quarter times the gross annual revenue in the case of the larger properties — the cumulative interest during construc- tion charges incident to the long period of construction involved in the building of the larger works being accountable for the difference.” Bearing on this same subject the author, in a paper read in 1912 before the American Society of Civil Engineers, said: “ The most logical course to be pursued, and the one which is always open to the appraiser ”’ (rate-fixing authority) “is to use the best available means for determining the amount of capital which is properly invested, then to determine what the earnings should be to yield an ordinary return on the investment thus ascertained, and then to increase these earnings by an arbitrary ” (reasonable) ‘“ amount, which may vary within wide limits, not only to compensate for past losses and for the hazard during construction and operation, but also as a compensation for management.” And again: ‘“ Any addition to the rate of

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