Akron daily Democrat. [volume] (Akron, Ohio) 1892-1902, 1901-09-13
PROF. BEMIS' REPORT
ON RAILWAY VALUATION.

| to the value of the properties repre-
sented. The Baltimore e. Ohio sys
tenn was not included because the Sc
curities Of the portion of the system
in Ohio are largely the securities for
! the entire system from Philadelphia
westward. Since the eastern portion
Is probably more valuable per mile
of line than the Ohio division, it was
tribute its securities on mileage
basis over the roads west of Pittsburg
This objection did not apply in any
considerable degree to the roads ac-
tually selected for special study in
| this list. Other roads, like the Wa
bash and the Norfolk & Western, were
excluded because so small portion
of their mileage was in the state. In
! fact, every effort has been made TO
err, If at all, on the side of conservat-
ism in the attempt to be fair to the
roads.
There is evidence that the real value
of some of the Ohio roads is higher
of their securities. Part of the value
appears In the value of the securities
of eastern roads that hold a majority
of the stock, and, in order to turn
freight in their direction, or for other
reasons, divert considerable portion
of the net income of the Ohio roads
into permanent betterments.
The New York Central, for example
is understood to be committed to Il
policy of not permitting the Lake
Shore, which it controls, to pay more
: than 7 per cent dividends on its 500,
100000 of stock. This stock, conse-
/. quently, sells at only $50; yet the road
not only earned and paid per cent
3 dividends in the year ending December
/: 81, 1900, in addition to interest on its
debt, but 1t had surplus of GAG per
{ cent. besides, or $3105, 1880, which
was used toward the purchase of a
controlling interest In the Big Four
and the Lake Erie Il Western roads,
aside from large investments on its
( own line. Under such management
as usually prevails, the Lake Shore
4 would probably sell in the market for
: SS0,OO0,000 more than it does and
t there would be 5000, 600 more of ap-
l. parent value on that portion OF the
. line in Ohio, while the New York
@ Central would sell for less.
The Pittsburg, Cincinnati, Chicago
}. Il st. Louis, after paying its fixed
: charges and devoting its usual liberal
!. allowance for maintenance and repairs
i during the year ending December 81
h and yet had only paid out in dividends
h $007 ,670, being per cent on it's $22,
J. G93,99l of preferred stock. The re
8 maindcr, $l.474,GS027, was devoted t.
@ extraordinary expenditures, in inprov
: ing the road and in paying certain
d premiums, in order to exchange some
per cent bonds for others bearing
o 3ia per cent interest. This was doubt
n less good financial policy for the road
d and especially for the proprietary com
> pany |. e., the Pennsylvania, but tn,
3 consequence was that the market valu,
# of the stock was only 93s for tn,
d preferred and 03& for the common
= stock, or $30Si4,7l6, instead of $40,
l. 100000 more rs II surely would hay,
/. been had the net income been dlstri
,. butcd. since per cent railroad securlt
4 les of any OF our large railroad sys
g TENS will today sell above par ant
l. the net income, capitalized at 8 pei
Y cent, would be $47647,00O.
= But even ON the basis of existln,
l. conditions, us has been stated. tn
10 twelve systems that have been re
o ferred to are only assessed at one
Al third as much In proportion to thei
Ia true value as Is farm and city rea
{. estate. These same roads during 100
A. had net earnings from operation Il
a. Ohio, before paying taxes, of $0085
Ia or S,23 per cent of their market value
.S Their net revenue, after paying take
$. Of almost $2,o00,o00 was $1,000, ,314, o
s. 4.B5 per cent of their true value, Il
t. other words the market value repre-
l. sents capitalization on the revenue
Of before paying taxes ut 523 per cen
e. and after paying taxes ut AGO per cen
Is That Is the same as saying that tn
re market value ls 101 times the incom
le before paying taxes, and 21.4 times a
10 much as the income after payln
er taxes. These last computations Wi
lie be applied to the net income of tn