SURFACE TRANSPORTATION BOARD CALCULATES RAIL INDUSTRY'S COST OF CAPITAL FOR 2010

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>From the Surface Transportation Board, Washington, D.C.
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The Surface Transportation Board announced today that it has issued 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)( http://www.stb.dot.gov/decisions/readingroom.nsf/WebDecisionID/41599?OpenDocument )

                                        , the Board found that the rail
                                        industry's after-tax cost of
                                        capital was 11.03 percent. Last
                                        year, the cost of capital was 10.43
                                        percent.


                                        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
                                        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.


                                        The Board estimated the
                                        cost-of-equity component of the
                                        cost of capital using an average of
                                        a Capital Asset Pricing Model
                                        (CAPM) approach and a multi-stage
                                        Discounted Cash Flow (MS-DCF)
                                        model.


                                        The Board's decision in Docket No.
                                        EP 558 (Sub-No. 14) is available at
                                        the Board's website at
                                        www.stb.dot.gov.


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