[Federal Register Volume 74, Number 20 (Monday, February 2, 2009)]
[Notices]
[Page 5896]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-2185]


-----------------------------------------------------------------------

DEPARTMENT OF TRANSPORTATION

Surface Transportation Board

[STB Ex Parte No. 664 (Sub-No. 1)]


Use of a Multi-Stage Discontinued Cash Flow Model in Determining 
the Railroad Industry's Cost of Capital

AGENCY: Surface Transportation Board, DOT.

ACTION: Notice of Final Decision.

-----------------------------------------------------------------------

SUMMARY: By a decision served on January 28, 2009, the Board modified 
its methodology for determining the cost of capital for the railroad 
industry by adopting the average of the estimates produced by its 
Capital Asset Pricing Model (CAPM) with the Morningstar/Ibbotson multi-
stage Discontinued Cash Flow (DCF) model to estimate the railroad 
industry's cost of equity.

DATES: This action is effective on January 28, 2009.

FOR FURTHER INFORMATION CONTACT: Timothy J. Strafford, (202) 245-0356. 
[Assistance for the hearing impaired is available through the Federal 
Information Relay Service (FIRS) at 1-800-877-8339.]

SUPPLEMENTARY INFORMATION: The Board has been thoroughly reviewing its 
regulatory processes for determining the railroad industry's cost of 
capital. The overall cost of capital is determined through the use of 
two figures: The cost of debt and the cost of equity. The cost of debt 
is readily available and observable; however, the cost of equity is not 
and must be estimated using a finance model. The Board determined in a 
decision served on January 28, 2009, the combination of finance models 
that it found best depicts the cost of equity, and thereby the cost of 
capital. In that decision, the Board revised its methodology for 
determining the cost of capital for the railroad industry by adopting 
the average of CAPM and the Morningstar/Ibbotson multi-stage DCF model.
    Additional information is contained in the Board's decision. A copy 
of the Board's decision is available for inspection or copying at the 
Board's Public Docket Room, Room 131, 395 E Street, SW., Washington, DC 
20423-0001, and is posted on the Board's Web site, http://www.stb.dot.gov.
    Pursuant to 5 U.S.C. 605(b), we conclude that our action in this 
proceeding will not have a significant economic impact on a substantial 
number of small entities. This action will not significantly affect 
either the quality of the human environment or the conservation of 
energy resources.

    Authority: 49 U.S.C. 10101(14); 49 U.S.C. 10704(a)(2)-(3).

    Decided: January 23, 2009.

    By the Board, Chairman Nottingham, Vice Chairman Mulvey, and 
Commissioner Buttrey.
Jeffrey Herzig,
Clearance Clerk.
 [FR Doc. E9-2185 Filed 1-30-09; 8:45 am]
BILLING CODE 4915-01-P