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 300 invested. When the sum of all intangible values is thus deter- mined (by capitalization of a part of the earnings) it will matter little what name is used to designate them. But the increment of earnings in excess of the ordinary interest rate on investments in safe going concerns should be so fixed as to cover also any amortization made necessary by obsolescence, or loss by fortui- tous events, and to cover whatever allowance is to be made as compensation for management and as a share in general pros- perity, possibly in lieu of appreciation. When the limitation of this excess by rate-fixing authorities is under consideration, it can probably be more nearly standardized by bringing it into some definite relation to volume of business, as already fully explained, than in any other way. The fact should not, however, be overlooked that compensa- tion for management and for hazard must be deducted from net income before the same can be capitalized to find value. It will suffice to say in this connection that no new owner would de- prive himself of the benefit of compensation for management by paying to the former owner anything for the privilege of assum- ing the management. Were he unwise enough to do this he would be making a financial sacrifice which would nullify the com- pensation. Likewise in the case of hazard. The assumption by a new owner of a hazard for which some properly ascertained return is in prospect has no capital value.

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