Reichstarif für Buchdruckerei-Buchbinder

Valuation, depreciation and the rate base

Bibliographic data

Monograph

Identifikator:: 1831802309

URN:: urn:nbn:de:zbw-retromon-220980

Document type:: Monograph

Title:: Reichstarif für Buchdruckerei-Buchbinder

Place of publication:: [Berlin]

Publisher:: [Verlag nicht ermittelbar]

Year of publication:: 1927

Scope:: 27 S.

Digitisation:: 2022

Collection:: Economics Books

Usage license:: Get license information via the feedback formular.

Chapter

Document type:: Monograph

Structure type:: Chapter

Title:: § 3. Arbeitszeit

Collection:: Economics Books

58 VALUATION, DEPRECIATION AND THE RATE-BASE ties (if the accounting system throughout has been proper and the enterprise has met with no untoward experiences) or what may generally be a safer approximation, the capitalized net earnings, less the cost of reproducing the physical properties. A taxicab concern, for example, has invested in the business $100,000. The net annual earnings after allowing for depre- ciation are $30,000. If it be assumed that 1o per cent per annum is a reasonable return on an investment of this character and permanency of the business may be assumed the capitaliza- tion of the concern might be at $300,000. The good-will of this taxicab business appears at $200,000. That is to say, if there were no fear of a reduction of income through competition or other causes, a valuation three times as great as the actual in- vestment might be justified. In such a case the sum of all in- tangible values connected with the business which may include besides what is strictly good-will, advantageous leases on de- sirable space for the taxi stands and contracts with railroads or other transportation companies, is the capitalization of the net earnings of $30,000 per year, or $300,000, less the value of the physical properties assumed as above stated to be $100.000. Ordinarily, however, in a business of this character, the earn- ings may at any time be cut down by competition. Any in- tending purchaser taking this into account as a hazard of the business will conclude that, while earnings of 10 per cent a year on the value of the tangible property may be adequate, the re- turn on the value of uncertain intangible elements should be very much greater. He may find circumstances that will justify him in concluding that the return on any allowance for good-will should be 20 per cent and in this event he will find: Total annual net earnings. « . . is «ves rvs eee oii .. $ 30,000 Ten per cent of value of physical properties. .......... 10,000 Net annual return on intangible values............... » 20,000 Capitalization of $20,000 per year at 20 per cent............ $100,000 Consequently, the amount which he, as a prudent purchaser, would be willing to pay for the business would be only $200,000

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