Re: Santa Cruz Branch purchase imminent. What is a "Good Buy?"
Author: Dragoman
Date: 11-16-2009 - 09:42
Doesn't the question of "good buy" revolve around purchase price? This is an area which I do not understand, when applied to decrepit branch lines. I know that the STB gets involved, but what standards do they use?
In business contexts, you normally value the purchase of a business or operation in one of two ways. One is a Net Asset method, looking at asset values less outstanding or contingent liabilities. The other is a Return On Investment (ROI), looking at the amount of profit or cash flow that the operation generates.
Here we have an operation which apparently loses money, the main asset of which is a narrow strip of real estate that would seem to be essentially useless commercially, except as a money-losing railroad -- with railway assets that are in such a state of disrepair as to appear to be valueless.
So, why doesn't the STB value the whole thing at zero, and do the UP a big favor by letting them walk away from the money-pit and give it to the county for nothing?!?