ROCE weaker

Capital employed equates to the assets deemed necessary for business and subject to the cost of capital, as derived from the balance sheet. The increase in capital employed resulted inter alia from an increase in the account balance of property, plant and equipment, for reasons including vehicle procurement and decrease of other provisions.

We calculate DB Groupʼs cost of capital as a weighted av­­erage interest rate of equity, net financial debt and pension obligations.

When determining the company-independent capital market parameters, market risk premium and risk-free interest rate, short-term fluctuations in debt and equity market returns are smoothed out in line with the long-term focus of our value management concept. The parameters are determined on the basis of the yields on long-term German bunds as well as the long-term average returns of the German DAX 30 equity index. The parameters used are also validated on the basis of up-to-date recommendations of recognized valuation experts. The company-dependent capital market parameters, beta and credit spread, measure the risk of our debt and equity financing in comparison with alternative forms of investment. Beta reflects the risk of equity capital relative to the risks of the equity markets. The determination is based on comparable international companies at business unit level. The credit spread corresponds to DB Groupʼs current issue costs relative to bonds with an imputed term of ten years. The credit spread for transport and logistics is determined in line with market conditions, using current capital market data.

Tax factors are calculated using a taxation rate of 30.5%. The tax factor for net financial debt reflects the trade tax applied to fixed debt interest to be credited. The taxes remaining after this are fully allocated to cost of equity. The weighting of forms of financing is based on market values. Net financial debt and pension obligations are valued at their carrying amounts. Equity weighting is based on recognized business valuation methods.

The weighting of forms of financing for passenger transport, rail freight transport, logistics, infrastructure and the integrated rail system corresponds to that of DB Group as the tax shield resulting from the tax-deductible status of debt interest arises, as a rule, from the fact that DB Group is a consolidated tax group.

¹⁾ Each value taken at the beginning of the year..

In the year under review, the negative difference between ROCE and costs of capital remained on the level of the previous year. The shortfall is mainly due to the lack of profitability of the RIC and of DB Cargo.