218 NATURE OF CAPITAL AND INCOME [Cmar. XIII

value of this series at the point of time O is found by
adding together the present value of the separate items.
The best way to exhibit this is to begin at the last income
payment, A’”B"’. Just after this last installment, of
course, the property is valueless; that is, its capital-value is
sero. Just before this installment the capital-value is equal

to the installment itself, and is represented by A" BY. At

     

om

in

AT A

 

o
>
>=Fic.

 4.

any time in the interval between this installment of income
and the next preceding installment, the value will evidently
be found by following the discount curve B"'C",C" being
vertically over A”. The height A"C" is, therefore, the
capital-value of the property just after the payment A”B".
Its capital-value just before this payment is found by adding
the vertical line C”D”, equal to the installment of income
AB’. From D’ in turn we proceed backward along the
discount curve D"C'to C’, at which point A’C’ represents the
capital-value of the property just after the installment A’B’.
To this is added, if we pass back an instant, an amount
CD’ equal to the installment A’ B’. The result is A’,
the capital-value just before said installment. From IY, in