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 II. Definitions

Collection:: Economics Books

DEFINITIONS ; Fair Value. — The term “fair value” is used so frequently in the valuations of public service properties for rate-fixing purposes, that it deserves more than passing notice. As a basis for the fixing of rates it is difficult to define. Apparently it is usually intended to mean market value, — the value which would be ascertained by a prudent purchaser making thorough inquiry relating to all circumstances affecting value. But in reality the value is a result and not a basis of earnings. It should not be made the rate-base.” The term ‘fair value ”’ has been used in a measure, no doubt, to rule out ““ book value ” or cost which may include items and amounts of doubtful propriety and to rule out estimates of value based on stock and bond issues and the market value of such securities. The term fair value as used by the courts has not yet been satisfactorily interpreted and no attempt will here be made to reconcile divergent views in relation thereto. But attention may be called to the difficulty which has been experienced by all who have attempted to make appraisals for rate-fixing purposes, in reconciling the value to a purchaser with the “fair value” which the courts wish to have considered when fixing rates. Why should there be one valuation for purchase and another for rate-fixing? The answer that has been given by the courts is practically to the effect that there should be no such difference, and experts have found difficulty in so appraising values that any such difference shall disappear. The value to an investor is unhesitatingly determined from the net earnings, with due regard to hazards of the business. The value for rate-fixing purposes as the courts say is to be that value on which, with the same regard for the hazards of the business, the owner is to be allowed to earn a fair interest return. Value should be the same whether determined by a rate-fixing body or whether determined for a purchaser. When the acquisition of the properties of the Maine Water Company by the Kennebec Water District was under consider- ation, the Supreme Judicial Court of Maine included in its in- structions to the appraisers (Dec. 27, 1902) the following: I

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