_3._—That in the case of properties located so as to secure either a monopoly of business in a congested territory, or in which the construction, location, strategic position, or economic excellence of design, is such that, on a schedule of rates which is fair and reasonable for competitors less advantageously situated, an earning is secured which is in excess of usual returns, a non-physical value of considerable magnitude may very properly be assigned. _4._—That, for the computation of non-physical values, the income account of the property under consideration affords the only legitimate basis, but even then consideration must be given to duration of franchise, reasonableness of rates, and other modifying conditions, and also, possibly, the purpose for which the appraisal is made may determine whether or not a non-physical value may be used. The language of the Court in the Knoxville and Omaha cases apparently leaves this a very open question. This brings us substantially to the conclusion reached by Professor Adams in 1900, and a careful study of the method laid down by him shows nothing that cannot be accepted as fair and reasonable. His plan should be extended so as to cover subtractive values or the case of properties showing a deficit. This method has the merit of being based on the actual earnings and expenses of the company under investigation and on the value of the physical property as already computed. It does not introduce a mass of purely supposititious figures, nor depend on hypothesis. The proposition is simply this: If a property earns only its operating expenses, including therein proper depreciation reserves, taxes, and such a percentage on its actual invested capital as could be earned by that capital if invested in good non-taxable bonds or other like security, it is worth no more than its physical property is worth. If it earns more than that, it is due to the franchise, going concern, or other intangible elements of value, and, to determine that value, capitalize the surplus. It takes several years for a property to reach its normal earning capacity after construction is completed, and, in the investigation of a property of comparatively recent construction, where the gross and net earnings show a steady annual increase, the application of a negative or subtractive value should be made with great caution; but where the earnings have been fairly uniform and stationary for a period of years, and the property does not earn a sufficient sum to care for depreciation and annuity, it is clear that the value as an earning investment is less than the determined physical value, and that the physical valuation should be reduced by some amount to arrive at the "fair value." 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 from earnings to cover depreciation and obsolescence, and