Railroad cost of capital rises to 11.01%
Written by William C. Vantuono, Editor-in-ChiefThe Surface Transportation Board today announced its decision calculating the railroad industry’s cost of capital for 2010.
In Railroad Cost of Capital—2010, Docket No. EP 558 (Sub-No. 14), the board found that the rail industry’s after-tax cost of capital was 11.03%. Up from 10.43%.
STB noted that the figure represents it estimate of "the average rate of return needed to persuade investors to provide capital to the freight-rail industry."
The cost-of-capital is a key component of many of the agency’s core regulatory responsibilities It is used in evaluating the adequacy of individual railroads’ revenues each year. It’s also a factor in determining the reasonableness of a challenged rate, considering a proposal to abandon a rail line, or valuing a particular railroad operation.
The cost of capital decision in Docket No. EP 558 (Sub-No. 14) is available at the Board’s website at www.stb.dot.gov.
