04 VALUATION, DEPRECIATION AND THE RATE-BASE
Table 2 is based on the foregoing formule. For comparison
two rates of interest 6 per cent and 4 per cent per annum have
been used in estimating the amount which should be in the
replacement fund.
TABLE 2. THE REPLACEMENT FUND
For plants made up of numerous parts, all having the same probable
life new, all serving their full probable term of usefulness and no longer.
The plants are assumed to have an age equal to or greater than the num-
ber of years in the probable life term of their parts. The total invested
capital in each case will be # dollars for each dollar of annual investment,
when 7 represents the number of years in the probable life term.
Amount in the replacement fund expressed in percentage of the total
investment.
Shipesnd Prob. life 5 years. ' Prob. life To years. Prob. life 20 years. | Prob. life 40 years.
6 6
ren | Som age | op az om gm | ae
a —_— — — ——
5 38.2 onal REE AE
10 3% 6 3 | HE a HR ashe a A
15 38.4 3, 2 | 41.8 40.2 lle ve ellis
20 38.4 | 37.8 | 41.8 40.0 41.1 38.0] .....01.....
30 Ln 230 lB i UAT ZZ oy MIE TE
40 A | ome BE ao. sl 47 ol 27 oJ 436.7 IRs .3
GOBER oo YF 38.0| 36.0 30.9
Sol. Rl IRL AT TE 36.1 30.9
In the foregoing mathematical analysis, a plant has been
assumed which has reached its full growth and which has an
age equal to or greater than the number of years in the useful
life term of its parts. Moreover it has been assumed that all
of its parts have the same probable life when new.
The same formule will apply to any number of articles of
the same probable life installed at a uniform rate per year, even
when the plant of which they form a part is still being extended,
because in this case the articles may be separated into two
groups, one being composed of all articles » years of age and
less, which have not yet been replaced and the other group of
those articles which have replaced discarded articles. To each
of these groups taken separately the above formule apply.