STB Announces Railroad Cost of Capital for 2016


On August 7th the Surface Transportation Board (STB) announced they had determined the railroad industry’s after-tax cost of capital for 2016 was 8.88 percent.

The cost-of-capital figure represents the board’s estimate of the average rate of return to persuade investors to provide capital to the freight-rail industry. It is an annual calculation used a variety of regulatory calculations including: railroad revenue adequacy, rail rate reasonableness challenges, proposals for rail line abandonment, or valuing a particular railroad operation.

Announcement on STB website

Here are the cost-of-capital figures for the last 10 years:

Year COC
2016 8.88%
2015 9.61%
2014 10.65%
2013 11.32%
2012 11.12%
2011 11.57%
2010 11.03%
2009 10.43%
2008 11.75%
2007 11.33%