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

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Document type:: Monograph

Structure type:: Chapter

Title:: Chapter IV. Essentials of value

Collection:: Economics Books

ESSENTIALS OF VALUE &7 Advertising may be necessary to find a market for the securities whose sale is to furnish the money with which construction will be undertaken. A commission may have to be paid to the agent who buys the properties or who markets the securities. The securities may have to be sold at a discount so that the in- debtedness on which interest is paid may exceed the sum that was actually required to construct and acquire all the essential property. Promotion expense of this character does not usually appear in any valuation, nor in the estimate of the investment, though it may nevertheless have been an essential element of cost. The necessity which may have compelled the incurrence of a promotion expense may be deplored and yet it must be ad- mitted that, on the whole, society has benefitted by the pro- moters’ activity and by the carrying out of many enterprises which were not at the outset so attractive that bonds based thereon would sell at par or command a premium. In this connection it may be noted that the Wisconsin R. R. Commission holds that the cost of marketing bonds should be taken into account as a promotion expense but that all discounts do not necessarily become proper additions to physical value. The appraiser whether of value or of the investment will rarely be required to make a close estimate of the promotion ex- pense, but the fact that under the prevailing conditions there has generally been some legitimate promotion expense which may not appear in the valuation, should not be overlooked when rates are fixed. Intangible Elements of Value The Total Intangible Value. — Whenever the net return ex- ceeds a fair interest rate on the capital invested in the physical elements of any enterprise, there will be other elements of value in the same, not represented by the cost of any physical portion thereof. These values being apart from the actual investment in physical properties are usually regarded as intangible values. Ordinarily the sum of all intangible values will be the capitalized net annual earnings, less the investment in the physical proper- Ld

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