On the other hand, the appraiser who is chosen by the owner of a plant takes hold of the work with a feeling that he is expected to report a value as favorable as possible to his client, and this feeling is reflected in the report, regardless of how sincerely or conscientiously he tries to avoid it.
One of the most intricate and yet interesting problems in appraisement work is the computation of the "going value," or "business value" which should be allowed in addition to the physical value.
In considering a competitive enterprise, such as a railway serving a community in competition with another independent railway, this problem must be treated in a different way than in a non-competitive business, such as a water-works, gas-works, electric plant, street railway, or similar enterprise operating under the protection of an exclusive franchise, or under natural conditions equivalent to an exclusive privilege.
In considering competitive enterprises, it is manifest that a railway operating under conditions more advantageous than its competitor possesses an intangible value equal to the measure of that advantage. It is not clear, however, whether it is more proper to say that the railway possessing the advantage has a positive going value, or whether the less fortunate one has a negative going value. Using the rule formulated by the author, being that of Professor Adams, with some modifications, it is evident that many properties would show negative going values; but, as pointed out by the author, the Courts hold that public service corporations are entitled to earn:
(a) Operating expenses;
(b) Expenses of maintenance and running repair;
(c) Taxes;
(d) A sinking fund to cover depreciation and obsolescence;
(e) A reasonable profit on the fair value of the property.
It is improbable that a reasonable profit on the fair value of the property could be construed to mean less than the interest or revenue from a like amount of Government bonds or other non-taxable securities.