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

68 VALUATION, DEPRECIATION AND THE RATE-BASE has, however, one feature in its favor. The operator thereunder can look with some confidence into the future and if circum- stances justify, will find it to his interest and may be expected to make suitable provision for the growth and future demands of the community. Knowing that the prospective earnings justify this course, he can build far ahead of the immediate requirements. But this advantage is not of sufficient impor- tance to justify the grant of perpetual privileges and such privi- leges are now rarely, if at all, granted by any of the states. The term of a franchise should not be too short. When the evils of the perpetual franchise began to be fully realized, the next step was to the other extreme and terms were in some of the states restricted to 25 years. Usually several years are consumed in the construction of works, 5 to 10 years or more in the development of the business and thereafter there should be ample time left within which to make some profit. A term of 40 to go years would seem to be about right, not alone to en- courage reasonable development under a franchise, but also to give the public opportunity to renew, at not too great inter- vals, the conditions subject to which the privilege is granted. Amortization During the Life of the Franchise. —In any event suitable provision should always be made to amortize the capital invested either by a purchase on an agreed basis at the end of the franchise term or by the amortization of a part or all of the investment during the life of the franchise with a view to an acquisition of the property by the public. If the latter plan is followed, there may be danger of neglect in the last years of service, as it will be to the advantage of the owner to expend as little as possible in upkeep, provided only that he can continue rendering the service. The provision which must be made in such a case to amortize the investment may cover the entire term or only a portion of the franchise term. The Indeterminate Franchise. — The indeterminate franchise is fast finding favor. No definite term of life is fixed but pro- vision is made that at any time after a specified number of years, the community may take over the property either at an agreed

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