Friday, September 14, 2012

Rail cost of capital rises to 11.57%

Written by  Luther S. Miller, Senior Consulting Editor

The Surface Transportation Board announced Friday that it had determined the railroad industry's after-tax cost of capital for 2011 to be 11.57%, compared with 11.03% for the prior year.

Calculated annually, the cost of capital is used by the agency in evaluating the adequacy of individual railroads’ revenues each year. It also uses the figure when determining the reasonableness of a challenged rail rate, considering a proposal to abandon a rail line, or valuing a particular railroad operation.