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 III. Fundamental principles which control when appraisals of public service properties are to serve as a basis for fixing rates

Collection:: Economics Books

34 VALUATION, DEPRECIATION AND THE RATE-BASE considered apart from a complex property. Treated by itself the automobile shows a marked drop in value as soon as it goes into service and thereafter may be considered as decreasing at a fairly uniform rate per year.) 8. Whenever the rates to be charged for the service rendered by a public utility are to be fixed the current depreciation or the current replacement requirement must be estimated. This is usually done by compound interest annuity methods or by the so-called Straight Line Method. According to the procedure under which the necessary amount of earnings are determined, either the current depreciation or the current replacement re- quirement are then made a part of the necessary earnings. 9. According to the procedure which is adopted for treat- ing the replacement requirement, depreciation and amortization in the accounting system, the computation of earnings that are necessary from year to year will vary. Any one of a number of methods of procedure may be adopted with due regard to the following: a. Is it desirable to keep the required earnings in the early years relatively low? b. Is any portion of the invested capital to be amortized or is there to be any amortization of expenditures for unproduc- tive work? c. Has there been any amortization of capital in the past? d. What hasbeen the relation of earnings to operating expenses? e. What amount of prospective business is to be taken into account? 10. An earned depreciation allowance may be regarded as an amortization increment. The depreciation allowance is then for all practical purposes a repayment to the owner of a part of his invested capital. It will, in that event, make no difference in the ultimate result, at what rate the repayment of capital is made. Ordinarily capital is retired as follows: a. In equal annual amounts which without interest will in the life of the article whose cost is to be amortized amount to that cost. (The Straight Line Method.)

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