_3._—From "total income," deduct taxes, rents paid for lease of operated property (provided such property is not included in the appraisal), and improvements chargeable to income. The remainder represents the income after all charges against operation of property, and maintenance of the integrity of the capital investment have been cared for. _4._—From this remainder (_3_) deduct such a percentage of the value of the physical property (representing invested capital) as would equal the income of that capital if invested in government or other non-taxable bonds. The remainder would represent surplus, which, capitalized at a proper rate, would equal the value of intangible or non-physical properties, which is to be added to the appraised value of the "physical property." _5._—If, instead of a surplus, a deficit occurs, a careful study of all the conditions surrounding the operations of the property should be made, and, if there be no reasonable expectation of increase of earnings, or other modifying conditions, a proper figure, based on the average deficit, should be determined, and, as a negative intangible value, deducted from the value of the physical property. _6._—In the determination of rates, to be used in computing income and for capitalizing surplus or deficit, the greatest of care must be exercised to adopt such figures as will be proper and absolutely just. CONCLUSION. The subject of valuation is so appallingly great that, notwithstanding the length this paper has reached, many points have not been covered. No discussion of the method of valuation by capitalization of net earnings, which is practically that adopted by Professor Adams in his commercial valuation, has been attempted; nor has any attempt been made to describe the stock and bond method. Neither method is adaptable to the requirements of any public appraisal. The so-called cash investment in property, or the actual cost of construction through the entire history of the property, cannot be sustained by any process of argument as a proper method of valuation, nor can the method of computing the cost of construction of an adequate modern property assumed to replace the existing property. The scope of a valuation must be limited to the property as it exists on the date of the appraisal, and it would be equally fallacious to include non-existent and long-perished facilities, or to assume a hypothetical and never-existing property. There are many intricate problems in connection with a valuation for rate-making or taxation which really belong to these undertakings, not to valuation. They are usually brought into the discussion of valuation, but have been here excluded. Among these are the separation of interstate from intra-state business, and others, of great interest, it is true, but foreign to the subject of valuation.