Page:Indian Journal of Economics Volume 2.djvu/39

 ARI' OF ECONOMIC DEVELOPMENT 29 by the fact that the money capital. Even if there were that interest may be paid is provided by share not the usual provision to shareholders out of capital during the period of construction, the ultimate result to the shareholders boa public 'authority. For is exactly the same as one thing, their money when not locked up in works nnder construction should them 4 per cent or in any easily be earning for with a banker, interest on deposit saleable security. Consequently at least this rae of interest should be compounded as part of the cost of works in which capital lies idle pending completion. It is true that the adoption of the faster method would leave the company's block account bigger; but the company's shareholders would be more than repaid by the earlier dividends which they would secure. In reality, however, it would not be good finance to distribute the whole of the profits gained by completing a work rapidly by means of an increased capital outlay. Such part of these profits as would represent the normal rate of interest on the capital outlay during the period of time which has been saved should be deducted from revenue and credited to capital in reduction of the block account. This need not necessarily be done during the actual period of time during which earlier Operation was secured by the enhancement of the rate of completion of the work: the amount may be calculated, and its deduction from revenue may be spread over a longer series of years, thus providing the earlier dividend, but at a correspondingly lower rate at the time and in succeeding years. It may be useful to remark that in both the foregoing examples the figures of the different capital costs by the slow and fast methods of completion were purposely chosen so as bo leave only a com- lravely small margin of saving by adopting the