124 VALUATION, DEPRECIATION AND THE RATE-BASE 
Elements of Value. — No definite and final rules can be laid 
down as a guide for the appraiser in reaching his conclusions 
relating to value. He is directly concerned with the ascertain- 
ment, as definitely as circumstances will warrant, of the net 
revenue both present and prospective. He must give considera- 
tion to: 
The cost of construction. 
The cost to reproduce the property new. 
The relation of the property to actual or possible competing 
properties. 
The condition of the property, including its adaptability to 
the intended purpose. 
The weight to be given to these items and the method of 
applying them in making valuations will be discussed in the 
proper chapters of this publication. 
When property with a salable output is valued for purchase 
or sale, or for capitalization, or bonding, the investigation must 
be extended to cost of operation and the market value, present 
and prospective of the service rendered or of the commodity 
furnished. 
In the regulation of rates, also, consideration should be given 
to the value that will result from the earnings and this likewise 
involves a comparison of operating costs with earnings, present 
and prospective, from whatever source. 
Valuation for Purchase or Sale 
When property is to be valued for purchase or sale, both the 
seller and the purchaser desire to know the value as determined 
from the excess of the earnings over the cost of operation. 
First Step — Determination of the Cost. — The first question 
to be answered in determining the amount that may reasonably 
be assumed to be invested in the property will be what has the 
property cost or what may it reasonably be assumed to have 
cost. Perhaps this can be ascertained from the cost records 
with due consideration of losses from unprofitable operation and 
with proper allowance for excessive promotion costs, for exces-