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Rail News: Rail Industry Trends

STB calculates rail industry's cost of capital in '08


Last week, the Surface Transportation Board (STB) announced it has calculated the rail industry's cost of capital for 2008.

The board determined the industry's after-tax cost of capital was 11.75 percent compared with 11.33 percent in 2007. The STB uses the cost-of-capital figure when evaluating the adequacy of individual railroad’s revenues each year. The calculation also is used to help determine the reasonableness of a challenged rail rate, consider a line abandonment proposal or place a value on a particular railroad’s operation.

This year, the STB estimated the cost-of-equity component of the industry’s capital cost 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 9/29/2009