THE PURPOSE OF THE APPRAISAL -.3 
In this event the plant may be regarded as having unlimited 
life. Each part thereof as it wears out is replaced out of cur- 
rent earnings. The owner does not maintain an amortization 
fund, neither is any of his capital rendered dead or unavailable. 
To him the value of the property is at all times 100 per cent, so, 
too, in the case of a purchaser. Knowing that all replacement 
requirements are fully covered by the earnings, the purchaser is 
willing to pay roo per cent for the plant, regardless of the 
amount of accrued depreciation. 
The case may be considered of a public service property 
whose earnings have been inadequate to supply any amortiza- 
tion increment, but which will in the future be able to earn the 
actual annual replacement requirement. The original invest- 
ment in this case having been 100 per cent and there having 
been no amortization annuity in the past, there can be no trans- 
fer of the property at less than roo per cent without loss; but 
if, by reason of inadequate returns, the market value could not 
be maintained at roo per cent, and a sale has been made at less 
than this sum, the new owner will be compensated and pro- 
tected if, on his investment which is not original cost, he earns 
reasonable interest and an adequate amount for replacements. 
This must be so, because, in the future, actual replacement re- 
quirements being covered by the earnings, the worn-out parts will 
be replaced without cost to the owner. This replacement neither 
increases nor decreases his investment; but, if the property is 
extended and new parts are added, such additions represent 
newly invested capital to the full amount of their cost, and in 
such a case his investment, expressed as a percentage of the 
total cost, will gradually increase. 
At all times, however, without causing loss to the new owner, 
that part of the plant which he bought at a depreciated value 
could be valued at his purchase price, while all extensions sub- 
sequent to the purchase, on the assumption that replacements 
are met out of earnings and that there is no amortization of 
capital, should, for rate-fixing purposes, be appraised at roo per 
cent. Such a course, however, would deprive the new owner of 
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