Ticker Comparable Company Levered Beta Debt Equity Value Beta Unlevering Factor

(in $ Million) (in $ Million) 1+(1-T)(D/E)

BNI Burlington Northern 0.9500 4239.0000 12834.6000 1.1982
CSX CSX 0.9800 2848.0000 10522.7000 1.1624
CRR Conrail 0.8500 2078.0000 5755.7000 1.2166
NSC Norfolk Southern 0.8200 1765.0000 11658.7000 1.0908
UNP Union Pacific 0.8200 6155.0000 10223.0000 1.3612

Average 0.8840 Average

Unlevered Beta

0.7929
0.8431
0.6987
0.7517
0.6024

0.7377
Levered Beta Under Various Debt to Equity Financing Assumptions

Debt/Capital Debt/Equity Unlevered Beta Beta Levering Factor Levered Beta

1+(1-T)(D/E)
0 0 0.7377 1.0000 0.7377
10% 11.10% 0.7377 1.0666 0.7869
20% 25% 0.7377 1.1500 0.8484
30% 42.90% 0.7377 1.2574 0.9276
40% 66.70% 0.7377 1.4002 1.0330
50% 100% 0.7377 1.6000 1.1804
Cost of Equity Capital Under Various Debt to Equity Assumptions

Assumptions of Inputs to the CAPM Debt/Capital Debt/Equity

Market Risk Premium 7% 0 0

Risk free Rate of Return 6.64% 10% 11.10%
20% 25%
30% 42.90%
40% 66.70%
50% 100%
Levered Beta CAPM Cost of Equity Estimate
Rf + i (Rm Rf)
0.7377 11.8042%
0.7869 12.1482%
0.8484 12.5789%
0.9276 13.1335%
1.0330 13.8709%
1.1804 14.9028%