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 = instead of $300,000. In other words, $300,000 would be an over- capitalization in view of the risks of the business, and an adequate annual net return from a business of this character should exceed 10 per cent on the total value thereof. As another illustration of relatively high intangible value, a newspaper route may be cited. A thousand subscribers, at $4 each, would make the value of this route $4000. The invest- ment in physical elements such as a cart and horse may be in- significant. There are, no doubt, many such routes where the bicycles and hand carts in use by the delivery boys are furnished by these boys and not by the owner of the route. Practically the entire value of such a route is represented by good-will. Intangible Value Under a Restricted Franchise. — When public utilities are under consideration, the problem may be- come quite complex and each case will have to be considered by itself. A restricted or limited franchise, for example, may make a monopoly of the enterprise, and its terms may be such that charges for service cannot be reduced by any rate-fixing body during the life of the franchise. Under such circumstances, when the volume of business is determinable, it is possible to forecast with some degree of certainty, on the basis of past ex- perience, the annual net earnings and a capitalization of these at a fair rate of interest leads directly to a determination of value. A comparison between value thus ascertained and the cost of reproduction of the physical elements establishes the aggregate value of all intangible elements of whatever nature connected with the utility. Of course, the capitalization of earnings, as here set forth, may not in all cases be a simple matter, because many factors are to be taken into account: The allowance for replacements must be correctly determined. The hazards of the business must not be overlooked. The value of the properties remaining on hand subject to sale at the termination of the franchise may be a factor of some moment in determining how much of the investment is to be amortized within the life of the franchise. Nevertheless, the fact remains that the restricted, exclusive 5Q

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