POSSIBLE PROCEDURES IN FIXING RATES 11 
ing rates, under continuous application from the beginning, is 
correct and proper, an electric generator with a life of 20 years, 
which has served 15 years, may again be taken as a basis for an 
illustration. 
The usual assumption is made, for the purpose of this illus- 
tration, that there is no change in the cost of this article during 
its life, that it has no scrap value and that it will go out of service 
when exactly 20 years old. Interest in this illustration is taken 
at 6 per cent per annum. 
By the “ Equal Annual Payment Method ” (correct if applied 
from the day the article went into use and if there were, in fact, 
agreement between actual and probable life): 
Original IVESUMENT. . [..\.\ us «oer $100.00 
Lie (nem hr rr 20 years 
Time in service... uh alas alle 15 years 
Remaining life...) ooo vinoa ls 5 years 
Accrued depreciation (amortization to date)............... 963.27 
Remaining value.................... .. Bese. ua. Be3iize 
Interest on remaining value. . ....... a $2.20 
Annual depreciation or annual amortization increment for sixteer 
FOAL . vir vas eS 6.52 
Required net earnings. .......... es +. 2 5.72 
In this case the depreciation in the 16th year is that amount 
which, invested annually at 6 per cent, will retire the remaining 
value $36.73 in the remaining 5 years of life. 
By the “Sinking Fund Method ” (correct under continuous 
application from the beginning and agreement between actual 
and probable life) the computation is as follows: 
Permanent investment. ......................... $100 
Life (ew). i a - 20 years 
Time fn service... ... i. vd. 2ars 
Remaining life....... ........ 0.8 ars 
Interest on the investment............. Ee al 36. OO 
Annual depreciation or annual replacement increment for any 
Required net earnings. ....... 2 cess srs a sa $8.72 
While it can be shown that for each year the earnings should 
be $8.72 on $100 of original capital investment, a new cal- 
ey