As the writer has recently submitted to the Publication Committee of this Society a paper on the "Going Value of Water-Works," written by him in collaboration with John W. Alvord, M. Am. Soc C. E., in which a detailed discussion of this subject will be found, only enough will be said to outline clearly his point of view.
The author says:
"The physical property is that which enables the corporation to do business. Without physical property it could not produce the commodity which it sells. The amount of money actually invested in acquiring that physical property represents the measure of capital on which it is morally entitled to earn interest and profit; and, in the stage of promoting and financing the enterprise, all hope of earnings is based on the amount of money required to construct the property."
He also says:
"It would seem reasonable to say that this difference between the physical value and the value based on earnings represents the 'good will,' 'established business,' or 'going value,' and all other non-physical elements of value."
In referring to going value, he says:
"* * * Yet, to fix a value on it by the method described by him [Mr. Alvord] involves going into the realm of conjecture and speculation to a degree that could never be sustained. * * * It can be readily seen that the physical present value is not always—indeed, is not often—the 'fair value.' The 'fair value' may be more, or less, than the present value of the physical property."
"* * * Is it not, then, proper to conclude that the non-physical or intangible value, composed of all these various elements of value, can only be determined absolutely by a study of the earnings and operating expenses? * * *"
He also says:
"The contention that all the different elements of non-physical value merge into one intangible value, not capable of separation, will doubtless be objected to by many engineers and corporation managers. * * *"