The Surface Transportation Board announced on August 5th that it has issued its decision determining the railroad industry's cost of capital for 2015.
In Railroad Cost of Capital—2015, Docket No. EP 558 (Sub-No. 19), the Board found that the rail industry's after-tax cost of capital was 9.61%. For 2014, the cost of capital was 10.65%.
The cost-of-capital figure represents the Board's estimate of the average rate of return needed to persuade investors to provide capital to the freight rail industry.
Calculated annually, the cost-of-capital figure is an essential component of many of the agency's core regulatory responsibilities. The Board uses the cost-of-capital figure in evaluating the adequacy of an individual railroad’s 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.
You can read the full decision HERE.