STB determines cost of capital for 2016

The Surface Transportation Board (STB) has determined the railroad industry's after-tax cost of capital for 2016 was 8.88 percent.

For 2015, the cost of capital was 9.61 percent, according to an STB press release.

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.

The STB uses the annual calculation in evaluating the adequacy of a railroad's revenue each year. The board 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.