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Rail News: Rail Industry Trends

STB calculates rail industry's cost of capital for 2009


Yesterday, the Surface Transportation Board (STB) announced it issued a decision calculating the rail industry's cost of capital for 2009. The board determined the industry's composite after-tax cost of capital was 10.43 percent compared with 11.75 percent in 2008.

The STB uses the cost-of-capital figure when evaluating the adequacy of individual railroads' revenues each year. The board also uses the figure to help determine the reasonableness of a challenged rail rate, evaluate a proposal to abandon a rail line or value a particular railroad operation.

This year, the STB estimated the cost of equity component of the cost of capital using an average of a Capital Asset Pricing Model approach and a multi-stage Discounted Cash Flow model.

Contact Progressive Railroading editorial staff.

More News from 10/1/2010