_Legal Expense._—This item is inseparable from the construction work, and was fixed at one-half of 1% of the cost of the same items as affected by the engineering charge. _Organization Expense._—This covered the cost of promotion, financing, and general supervision of construction, together with general office expense. These items were covered by an application of 1½% of the cost of the above items. _Interest._—This item is intended to cover interest on money during the period of construction. The length of time taken to build would, of course, be variable. It was assumed that 3% on the entire cost of construction and equipment would be conservative, and this figure was used. _Discount on Bonds._—This was not included, for the reason that it was considered, not as a proper capital charge, but rather as an adjustment of the interest rate to the existing market condition, and as chargeable to interest account and not capital. The discussion among members of the staff indicated such a wide range of opinion as to the proper percentages to apply, that the final determination of the rates was passed upon by the Board of Review. There can be no question as to the propriety of these items as proper elements in the first cost of construction of a new railroad. On the theory that the cost of reproduction of the physical property should include every item of expense which would enter into the cost of reproducing the property as it existed on the date of the appraisal, they are proper terms to include in the appraisal. As to whether the fixed rates were high enough in every case, is an open question. _The Charge of Ten Per Cent. for Contingencies._—Perhaps no single feature of the Michigan appraisal of physical property has been so generally criticised as the charge of 10% of the entire estimated cost, including all the percentage charges, to cover "contingencies." At the time the first appraisal was made, the writer was not at all satisfied that such an item, in such amount, should be included. The reasons advanced were so strong that it was done, and the writer's subsequent work has fully convinced him that it was proper and justifiable, because: (_a_) The conditions under which this particular inventory and appraisal were made, as to time and lack of co-operation of the companies, made it practically certain that some items of value were missed in the appraisal, such as station and miscellaneous equipment, frogs, switches, track structures, buildings owned by the companies and occupied by others, etc.