RATES OF RETURN IN RAILWAY INVESTMENT AND IMPLICATIONS FOR GOVERNMENT SUBSIDIZATION OF THE CANADIAN PACIFIC RAILWAYS: SOME PRELIMINARY RESULTS

DETERMINATION OF THE ECONOMIC PROFITABILITY OF THE CANADIAN PACIFIC RAILWAY (CPR) AS AN INVESTMENT PROJECT IS DISCUSSED, INCLUDING THE AMOUNT AND NECESSITY OF SUBSIDIES AWARDED TO THE CPR BY THE GOVERNMENT OF CANADA. THE ECONOMIC PROFITABILITY OF THE TRANSCONTINENTAL RAILWAY PROJECT WAS DETERMINED BY ESTIMATING THE PRIVATE RATE OF RETURN ON ACTUAL INVESTMENT IN THE CPR. THE RATE OF RETURN CALCULATIONS WERE EMPLOYED TO TEST THE VALIDITY OF THE ASSUMPTION THAT A SUBSIDY WAS NECESSARY TO INDUCE CONSTRUCTION BY A PRIVATE COMPANY. THE NECESSARY SUBSIDY "EX POST" IS TAKEN TO BE THAT PORTION OF THE TOTAL CASH COSTS OF CONSTRUCTION REQUIRED TO RAISE THE REALIZED PRIVATE RATE OF RETURN ON THE CONTRIBUTION OF PRIVATE INVESTORS TO AT LEAST THE NORMAL RATE IN ALTERNATIVE INVESTMENTS. THE POLITICAL OR SOCIAL NECESSITY OF THE RAILROAD ARE NOT QUESTIONED. IT IS CONCLUDED THAT A LARGER THAN NECESSARY SUBSIDY WAS PAID. /BPR/

  • Supplemental Notes:
    • Vol 1, pp 740-762
  • Authors:
    • George, P J
  • Publication Date: 1968-11

Media Info

Subject/Index Terms

Filing Info

  • Accession Number: 00200992
  • Record Type: Publication
  • Source Agency: Traffic Systems Reviews & Abstracts
  • Files: TRIS
  • Created Date: May 25 1970 12:00AM