66 VALUATION, DEPRECIATION AND THE RATE-BASE 
“In a computation of going value according to Alvord’s 
method the going value is the present worth of the amounts by 
which the net earnings of the comparative plant are less than 
the net earnings of the existing plant during the entire period 
from the date of the first preliminary work until the earnings of 
both plants are equal. . . . The loss to capital invested in the 
comparative plant is not to be measured by the extent to which 
its earnings during the construction period fall short of the net 
revenues of the existing plant, but rather by the amount by 
which they are less than the returns which have been foregone 
in order to enter the new field of investment. . . . The detailed 
computation of the cost of developing the amount of business 
necessary to yield a reasonable return upon the property in- 
volves a number of further assumptions which make the ac- 
curacy of the result very questionable.” 
Franchises and Related Matters 
The Franchise Value. — Any privilege or right granted by 
legislative authority to engage in a particular business is a fran- 
chise. 
Whenever the franchise or privilege to do business is an ex- 
clusive privilege and grants some latitude in the matter of the 
charges which may be made for the service rendered thereunder, 
it is an element that can be valued. It is well stated by the 
Supreme Judicial Court of Kennebec County, Maine, in in- 
structions to appraisers that its value ‘“ depends upon its net 
earning power present and prospective, developed and capable 
of development, at reasonable rates, and the value to be assessed 
is the value to the seller and not to the buyer.” 
When the value of a franchise is in question, all circum- 
stances that affect the earning powers of a property must be 
taken into account and by an analysis thereof the excess of the 
carnings over a fair return on the capital invested in physical 
properties must be determined. This excess of earnings when 
capitalized will give some idea of the total value of all intangible 
elements and may lead to the determination of the franchise 
value. 
Frequently, the only stipulation in the franchise in the matter