Rates of Return in Railway Investment and Implications for Government Subsidization of the Canadian Pacific Railway: Some Preliminary Results
1968; Wiley; Volume: 1; Issue: 4 Linguagem: Inglês
10.2307/133703
ISSN1540-5982
Autores Tópico(s)Maritime Ports and Logistics
ResumoDETERMINATION 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/
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