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 IV. Essentials of value

Collection:: Economics Books

ESSENTIALS OF VALUE i no insurance, will be nearly that of two buildings. In esti- mating the reproduction cost of the building, only one building would appear on the inventory, but in estimating its value, there should be added to the reproduction cost of the single building as otherwise determined, the sum necessary to insure its whole value against fire, and this sum should be added whether the owner actually paid it to an insurance company for carrying the risk or whether he assumed the risk himself. Similarly any other property which involves risk during its construction and testing should have added a contingent sum representing what the cost of insurance would be were there insurance companies to insure against such risks. “It is seldom that a large public service property is examined that there is not a disclosure of some large expenditure for works which have been destroyed, reconstructed, or not used because of faulty design or construction. In some cases this is dis- tinctly the result of negligence, but in a majority of cases such expenditures have taken place where the owners were not negligent in that they have taken due care in the selection of engineers to design and contractors to construct the work. They are the result of human fallibility. “ Many examples of failures have been furnished by masonry dams. A considerable portion of the Quebec bridge failed while in process of construction; there was a great slip in the Necaxa Dam, one of the highest earth dams ever built, when it was far advanced toward completion; the Loetschberg tunnel in Switz- erland encountered bad ground, which required the abandoning of the tunnel for about a mile and its relocation through another portion of the mountain; the change in plan of the new Croton Dam of the New York Water-Works involved an additional ex- pense of more than $1,000,000 for construction and interest. These are only a few instances of many which might be cited. Such disastrous occurrences are not contemplated by engineers when they make a provision for contingencies in preliminary estimates of the cost of works, but it seems proper in the valu- ation of an existing property which has been completed and successfully tested to recognize that the owner has been re- quired to assume the risk of accident and failure and should be compensated therefor by at least the amount which insurance companies would charge for taking such risks were they doing this kind of business. This feature may properly be included in the valuation by increasing the amount allowed for con- tingencies and risks.” 8]

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