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2/15/2008



Rail News: Rail Industry Trends

STB seeks comments on proposed complement to capital asset pricing model


ProgressiveRailroading.com's Feb. 12 news item entitled "STB seeks public comments on cost-of-equity calculation change" mischaracterized recent Surface Transportation Board (STB) actions. In a Jan. 17 decision, the board adopted the Capital Asset Pricing Model (CAPM) as the method it employs to determine the rail industry's cost of equity. Previously, the STB used a single-stage discounted cash flow (DCF) model to determine the cost of equity.  

However, the Jan. 17 decision left open the possibility that a multi-stage DCF model might prove acceptable to the board if used in conjunction with the CAPM model. The STB announced in the decision that it would shortly begin a new rulemaking to explore the matter further and made good on that pledge in a Feb. 11 decision.

On Feb. 11, the STB released an advanced notice of proposed rulemaking, "Use of a Multi-Stage Discounted Cash Flow Model in Determining the Railroad Industry's Cost of Capital." In that decision, the board announced it's seeking comments on whether an appropriate multi-stage DCF could complement the CAPM model adopted in January. Comments on that proceeding are due on April 14.


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