What is the benefit-cost ratio and the net benefits of a highway investment with thefollowing characteristics:a. Construction cost: $50,000,000b. Annual highway operating cost: $500,000C.Service life:d. Interest rate: 6%25 yearse. Year 1 traffic: 1,000,000 vehicles per yearf. Year 1 savings in travel time: 30 minutes, value of travel time savings is $15.00per hourg. Traffic growth rate: 2% per year compounded annually

Interpretation: The benefits exceed the expenses by a factor of 2.55, as indicated by the BCR of…

Answered: What is the benefit-cost ratio and the…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Assume that you are approached to assess a venture of building another bridge. Which of the following factors is the LEAST important in terms of engineering economics. a. number of vehicles in the city b. current interest rate c. cost structure d. service life of the bridge
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4. A government is planning to implement a new traffic control and surveillance system. The maintenance cost of the system is $1,200,000 per year. It is believed that the new system can help 3,000 driver saving 8 hours per year. The average wage of the people in this country is $150 per hour. It is expected that the system can be used for 5 years, i.e., the first benefit and cost are B1 and C1 respectively, while the last are B5 and C5. (a) What is the value of time saved by the new system per year? (b) Suppose the market interest rate is 5%. Calculate the net present value of this system. Should the system be launched? (c) Suggest two reasons to explain why the market interest rate in part (b) may be too high to evaluate the project. Should the system be launched if the interest rate is adjusted according to your suggestions?
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4. Consider the following a highway investment with the following characteristics: a. Construction cost: $50,000,000 b. Annual highway operating cost: $500,000 c. Service life: 25 years d. Interest rate: 6% e. Year 1 traffic: 1,000,000 vehicles per year f. Year 1 savings in travel time: 30 minutes, value of travel time savings is $15.00 per hour g. Traffic growth rate: 2% per year compounded annually a. What is the benefit-cost ratio? stion 15 4b. What is the net benefit?
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