FOR RELEASE
Contact: Janie Sheng (202) 245-0221
02/11/2008 (Monday)
No. 08-04


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SURFACE TRANSPORTATION BOARD SEEKS COMMENTS ON USE OF MULTI-STAGE DCF IN COST-OF-CAPITAL METHODOLOGY


The Surface Transportation Board (Board) today issued a notice seeking public comments on the use of a multi-stage discounted cash flow (DCF) model to complement the use of the Capital Asset Pricing Model (CAPM) in determining the cost-of-equity component of the railroad industry's cost of capital. The Board uses the annual cost-of-capital figure in evaluating the adequacy of the individual railroads' revenues each year, as well as in various types of regulatory proceedings (such as determining the reasonableness of a challenged rail rate, considering a proposal to abandon a rail line, or valuing a particular railroad operation in certain other types of cases).


Today's notice follows the Board's January 17, 2008 decision in Methodology to Be Employed in Determining the Railroad Industry's Cost of Capital, STB Ex Parte No. 664, in which the Board adopted a CAPM approach to replace the single-stage DCF method it had applied since 1982. In that decision, the Board also announced that it intended to institute a new proceeding to address the use of a multi-stage DCF for future use in conjunction with CAPM, and today's notice begins that proceeding.


Comments on the notice are due on or before April 14, 2008. The Board's decision in Use of a Multi-Stage Discounted Cash Flow Model in Determining the Railroad Industry's Cost of Capital, STB Ex Parte No. 664 (Sub-No. 1), is available for viewing and downloading via the Board's Web site at http://www.stb.dot.gov, under "E-Library," then under "Decisions & Notices," beneath the date "2/11/08." A printed copy of the Board's decision also is available for a fee by contacting ASAP Document Solutions, 9332 Annapolis Rd., Suite 103, Lanham, MD 20706, telephone (202) 306-4004 or via asapdc@verizon.


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