The Federal reserve act (approved December 23, 1913) as amended to March 4, 1931

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Monograph

Identifikator:: 1856431436

URN:: urn:nbn:de:zbw-retromon-262738

Document type:: Monograph

Title:: The Federal reserve act (approved December 23, 1913) as amended to March 4, 1931

Place of publication:: Washington

Publisher:: United States Government Printing Office

Year of publication:: 1931

Scope:: ii, 170 Seiten

Digitisation:: 2022

Collection:: Economics Books

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Document type:: Monograph

Structure type:: Index

Collection:: Economics Books

86 VALUATION, DEPRECIATION AND THE RATE-BASE annum treated as an annuity for the remaining 10 years, which, at 6 per cent per annum, is $64.17. At the end of 10 years, the original owner, keeping for his own use the money in the replacement fund, will be satisfied to sell at $64.17. The purchaser, content in this case with the assumed rate of interest of 6 per cent, will be willing to pay $64.17, be- cause at the end of the plant’s useful life, he will have recovered his investment with 6 per cent interest compounded annually. He will then be under the same necessity of replacing the plant, making a new investment of $100, as the original owner would have been if he had remained in possession. During the entire 20 years of usefulness the plant has been rendering adequate service. The efficiency of the service is inde- pendent of, and bears no relation to, the useful life of the plant, nor to the fact that some or all of its parts were gradually dete- riorating. Interchange of Terms — Depreciation, Amortization and Re- placement. — It cannot be known just how, nor at what rate, the actual deterioration of a plant takes place. This may be rapid at some period of its life, and slow at another, but, as the plant is supposed, at all times during its life, to be adequately performing the service expected of it, variations in this rate of deterioration are immaterial. In other words, the amortiza- tion of capital is a question which may be considered without regard to the physical condition of a plant at any period of its life. Nevertheless many engineers and economists have found it convenient to consider the actual, or the theoretical accumu- lation in an amortization fund as the measure of plant deprecia- tion with a consequent interchange of terms. The term “ de- preciation” is frequently used when the term amortization” would be more appropriate. There is a clear distinction between amortization and replace- ment. The amortization deals with the retirement of the in- vested capital. This may be in installments in uniform or in unequal annual amounts, or in a lump sum at the end of useful life. The replacement may mean the substitution of a new

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