Valuation, depreciation and the rate base

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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 67 of rates is that these shall be fair and subject to regulation. In such cases the franchise value should not be made a part of a rate-base, determined by investment, except only to the extent that its acquisition has actually required legitimate investment, as is the case, for instance, when a city sells to a Street Railway Corporation the right to operate cars on certain streets for a certain period of time. The franchise value together with the value of other intangible elements is independent of the actual cost of these elements; but a franchise value may result from the establishment of rates which produce earnings in excess of reasonable interest return on the capital invested in the physical properties. The ascertainment of franchise value and value of all other intangible elements connected with public utilities is similar to the ascertainment of the value of the good-will of a private business but with this difference. . . . In the case of the public utility there is usually protection against competition, while in the case of the good-will of a private business, competition or the possibility of competition is to be assumed and such com- petition may materially affect the value. A franchise is sought for and operations thereunder are un- dertaken for profit. Sometimes, of course, the profit to the party who accepts the franchise and operates thereunder is an indirect one, as in the case of the railroads which make large land holdings valuable. While the privilege to do business is granted in order that certain property may be used for the benefit of the public, the person or corporation undertaking the business must be assumed to be doing so in the hope of reaping an adequate reward. The Franchise Term.— In many of the states perpetual franchises have been granted. Rights to use water-powers, wharf and water-front privileges, the privilege to supply gas or water and the right to occupy streets for various purposes when thus granted without time limit may acquire relatively high value and may prove a serious obstacle to the ultimate rational development of natural resources. The perpetual franchise 2. =

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