The Richmond palladium and sun-telegram. [volume] (Richmond, Ind.) 1907-1939, 1909-12-21

from ten to twelve years, this rate of
depreciation appears too small, even
after considering that these boilers
were seldom crowded for any great
length of time
Based on Theory.
These depreciation estimates are
probably based on the theory that the
depreciation is small at first and very
great at the last. But, as far as its
market value Is concerned. the great
est depreciation OF this pipe and ma
chinery occurs in the early years of its
life. as soon, in fact, as it becomes
secondhand Thus the small de-
probation in wear in the early years is
offset by the large market deprecia-
ton in that period: and this would &C
count for and justify the common Gus
tom of charging fixed yearly rate of
depreciation running the entire esti-
| mated life OF the particular kind of
machinery Or property under consid
GRAFTON. The ordinary average annual
rate OF depreciation on water works
plants. taken as a whole. is about two
and one-half (212) per cent. The value
of the Richmond plant at first was
about $685. 600. and the present value,
based on duplication, as fixed by Mr..
Maury. before any deduction is made
for depreciation, is $500 900. The av-
erage investment for the whole period
of twenty-four years would, therefore
be 100000.
Applying the Rule.
Applying this rule of ~, per cent
yearly depreciation on that amount, we
would have as the total actual depre-
sciation of the property at this time
the large sum Of 100000; which. being
subtracted from his reproduction value
Of $500, 600, would leave as the actual
present value of the entire water
works property, the sum of $3.50 900.
in stead of $3.50, 800 ga Mr.. Maury's
total depreciation of the entire proper
ity in the twentyfour years is $685.
693.O2. This is but 1913 per cent. Or
a little over one-half of one per cent
per year. When it is only claimed
that the life of the mains is 100 years,
and the life of the pumps, boilers, me-
ters, valves. fittings, etc. is admitted
to be very much less, one half of one
per cent does not appear to the men,
bers of this board as fair rate of an.
nual depreciation on the water works
property as whole.
One of the most valuable parts Of
the report is that concerning the eff
cheney of the present system in the
matter of fire protection. and the rec
concentrations for betterments. These
include a new twenty-inch main from
{o$f ca, n hn oitNy
ing in on the National Road to Main
and Twenty-third streets; sixteen
inch main from there to South B and
Seventh streets, and various twelve
inch, ten-inch and smaller mains in diff
ferent PARTS of the city; new five
million gallon pumping engine, with
200 H. P. boiler; also an increase in the
output of the Cooper we'll from two
million to three million daily capacity:
the closing of many dead ends and
increasing the sizes of mains at vari-
Gus places: two additional ten-inch
mains across the river, the installation
of over 100 additional intermediate n.y.
drants. etc. AS to the latter recon-
mendation, the boards Information is.
that so far as the business and factory
districts are concerned, the number OF
hydrants is practically adequate at this
time: and that, taking the city as a
whole, there is no need of more than
twenty-five additional hydrants in the
near future: but these recommends
tons for betterments are, for the most
part, needed and the same would re-
suit in better service and fire protec-
ton to the property of our citizens.
The cost of all these improvements is
estimated to be about $135,DO, which
added to our estimate of the present
worth of the physical property latter
depreciation be deducted) S365.0OO
would make the value of the plant
$4,000 after they were installed.
We would. therefore. consider that sum
would be a fair price for the water
works after these betterments were
added, whether the purpose be to pur-
chase the same, or to renew the exist
ing contract. which expires in October,
1912.
Is Not Satisfactory.
On the question Of investment and
profits, the report is not satisfactory
because it is incomplete. 1t shows the
entire cost of the water works proper
ty at this time. and also shows the
growing cost of the different classes OF
the property in itemized form. but
does not show what the investment
was each year. so the same could be
used as basis of profit. The report
of receipts, expenditures and profits
covered the past six years. from July
ist 1903 to July LIST 1909. In order to
show the per cent Of profit each year
during this period. the amount of the
investment should have been set out as
a basis for calculation. 1t does. how
ever. show that there were net profits
during that period of S274,914.S5: that
of that amount the sum OF Slt.Sio.'.
was paid in cash dividends: thus leav'
ing S1gS, osg 10 to be added to the val
ne of the property. This difference OF
nearly S2OO0D in the amount of the
investment within a period of six years
illustrates the Importance of knowing
= the actual investment each year in or
: der to know what per cent of profit
G was made each wear: and the accurate