Road "A" occupies a narrow valley through high and abrupt hills. Its alignment is fair for hilly country; its maximum grade is 1 per cent. It has a number of bridges, all short and low. Its cost of reproduction might reasonably be placed at $28,000 per mile. A mining town at one end ships a heavy tonnage down grade to a lake port at the other. Road "B" was constructed several years later, and, being barred from the only valley, built a line across the hills, involving heavy grading, very long and high steel trestles, a longer line, maximum grades of 2%, and a heavy climb from the mining town to the summit before starting to drop to the lake. The cost of construction was more than double that of Line "A," and the tonnage which can be hauled in either direction is but a small fraction of that which can be hauled with the same power by Road "A." A reasonable figure for cost of reproduction may be given as $60,000 per mile.[4] Here is clearly a case where the older, less expensively built road has a value as an earning proposition far in excess of that of the new road. The rate on commodities does not affect the relative difference. A higher rate, while permitting Road "B" to live, greatly adds to the value of Road "A," while the latter can operate at a profit on rates which would not permit Road "B" to pay expenses. This example indicates the existence of non-physical values, not only positive in the case of Road "A," but also negative as to Road "B." Many properties have been built in the United States, representing large investments of capital, which are not, and some of which can never be, profitable business investments. In all such the physical valuation will exceed the final value where the property is considered as an operating concern, and a negative factor to cover improper location, uneconomical design, ill-advised investment, or whatever the trouble may be, should be applied. 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. These considerations lead the writer to contend that the true method of valuing a corporate property is first to determine the cost of reproduction of the property and its depreciation, and modify this figure by any applicable positive or negative non-physical elements of value. ----- Footnote 3: The term "present value," as used in this paper, should not be confounded with its use by bankers or accountants, or with the present worth of a sum of money due at some future time. Footnote 4: