Skc. 2] VALUE OF CAPITAL 205

exchange.” Still another application is to wealth which is
in course of trade and of which, therefore, the only service
to the owner consists in its sale. It is on this principle
that a dealer reckons the value of his stock, by discounting
 its selling price for the time which will probably elapse
before it is sold — deducting, of course, the prospective
expense of selling, discounted in like manner. Similarly, the
value of any article of wealth reckoned when that wealth
is in course of construction is the present value of what it
will bring when completed, less the present value of the
cost of completion. For instance, the maker of an automobile
 will appraise it, at any of its stages in course of
construction, as worth the discounted value of its probable
return when subsequently finished and sold, less the discounted
 value of the costs of construction and selling
which still remain. Of course, the element of risk cannot,
in such cases, be overlooked; but its consideration belongs
to a later chapter.
Another application of these principles of capitalization
is to goods in transit. A cargo leaving Sydney for Liverpool
 is worth the discounted value of what it will fetch
in Liverpool, less the discounted value of the cost of carrying
 it there. Other classical examples are wine, the value
of which is the present worth of what it will be when
“mellow” and ready for consumption; and young forests,
which are worth the discounted value of the lumber they
will ultimately form. In Germany and some other countries,
 such appraisement of forests is now worked out with
considerable precision.

§3

Tt seldom happens, however, that there is one item only of
income or outgo earned by an article of capital. The items
are unusually numerous. Perpetual annuities, for instance,
 form an important class, in which these items recur
in equal amounts and during equal intervals forever. We