Page:Indian Journal of Economics Volume 2.djvu/36

 26 H. TANLEY JEVON$ expenditure sunk in the work in question itself is kept idle pending completion. The second class includes all eases where delay in completing the work in question also involves equal delay in realizing income from capital expenditure on connsotsd works already completed, or capable of being speedily completed without extra cost for hastening the work. A good example of the first ease would be a long tunnel being constructed so as to shorten the routs and improve the gradient of an existing open line, assuming the approaches to the tunnel to cost very little in com- parison with the tunnel itself. In this ease the railway is working and yielding revenue all the time, and it is only the capital actually sunk in the tunnel itself which is idle. piction the saving annually effected tunnel will bs at least Es. 80000 per Let it be estimated that on eom- by use of the annum, i.e. 8 per cent on the minimum capital outlay. Also let it be estimated that by the slow method of construction, tbe time taken being 50 months, the cost will be Rs. 10,00,000; and that by the fast method, cornpict- ing in 0 months, the cost will be Rs. 11,00,000. It will also be assumed that the capitaJ needed for con- struotion of the tuunel is obtained by issuing deben- tures or cumulative preference' shares at 6 per cent per annum; and this is compound interest with work out as follows: Time taken to complete Capital Outlay interest) ... Cost, including (excluding seeumulstsd interest to time of eompletion Net oost (80 months not profits dedueted) ...... assumed to accumulate at monthly rests. The figures Slow Fst method method Months 50 2O Rs. Rs. 10,00,000 11,00,000 11,89,000 11,55,000 11,8,000 11,98,250