VALUATION OF ASSETS 39 



future, and the present value of the property rests upon the 

 mathematical relation between the future income and its dis- 

 counted value. 



62. Capital Value or Expectation Value. Capital value, or 

 expectation value, is the net value of property based upon future 

 income. It is the capitalized value of future income minus 

 future expenses. The terms "capitalized" and "discounted" 

 are synonymous. Therefore capital value is the discounted net 

 value of future income. Finally, since all future income is 

 included in present value, capital value is the sum of the dis- 

 counted values of all items of future net income. This definition 

 holds good whether the income is received at regular daily, 

 monthly or annual intervals, or at intervals of two or more, 

 even of 100 years, or is irregular in amount and paid at irregular 

 intervals. 



An example of regular annual income is the interest on a 

 money loan. This interest, capitalized, corresponds to the value 

 of the loan of capital. This relation established between capi- 

 tal and income through the rate of interest ( 38) is the means 

 of determining the capital value of all other forms of property. 



For money alone the value of the capital and of its use deter- 

 mines the value of the income or rate of interest, and the value 

 of money is neither raised nor lowered by fluctuations in the 

 rate of interest. 



For other property the relation is : 



1. Capital or property earns income. 



2. The value of this income is appraised. 



3. This value is then discounted to obtain the value of the 

 capital. 



4. The "rate of interest" is the measure of discount. 



The term "capital value" has so far found no place in the 

 literature of forest valuation. Instead, such authorities as 

 Schlich have- translated continental terms into the English 

 "expectation value." This term is descriptive of the fact 

 that such values are based on future expectations, not fully 

 determined; but it is open to objections, since it conveys the 



