RAIL SYSTEM INVESTMENT ANALYSIS: SAMPLE EVALUATION OF A TRACK REHABILITATION PROJECT

This report is a hypothetical case study developed to show how a railroad applying for Federal assistance under Title V of the Railroad Revitalization and Regulatory Reform Act of 1976 might calculate an internal rate-of-return for a major track rehabilitation project. The analysis consists of five main parts. The first part is a detailed description of the project--the rehabilitation of 110 miles of track (including extensive rail and tie replacement) at a cost of $9.4 million. The second part is a detailed description of the base case; i.e., the most favourable alternative action the applicant railroad could take without a major investment. This particular base case envisions steadily increasing expenditures for emergency or spot maintenance which nevertheless are insufficient to halt further track deterioration, more frequent derailments, and the imposition of new slow orders. The third part discusses key assumptions and traffic forecasts. The fourth part identifies and explains the project's cash flow components and shows how each was calculated. Finally, the fifth discusses principal areas of uncertainty. The hypothetical project yields an internal rate-of-return of approximately 38 percent. However, this finding does not necessarily imply that actual rehabilitation projects will yield similar rates-of-return. Nor should the case study, as a whole, be taken as an indication of the types of projects likely to receive Federal assistance.

  • Supplemental Notes:
    • Sponsored by U.S. DOT, Office of the Secretary, Office of Transportation Systems Analysis and Information and Federal Railroad Administration, Office of Federal Assistance, Washington, D.C.
  • Corporate Authors:

    Ernst and Ernst

    1225 Connecticut Avenue, NW
    Washington, DC  United States  20036
  • Publication Date: 1977-1

Media Info

  • Features: Appendices; Tables;
  • Pagination: 103 p.

Subject/Index Terms

Filing Info

  • Accession Number: 00193742
  • Record Type: Publication
  • Source Agency: Office of the Secretary of Transportation
  • Report/Paper Numbers: DOT-TPI-77-10-01
  • Contract Numbers: DOT-OS-60097
  • Files: TRIS, USDOT
  • Created Date: May 26 1979 12:00AM