The State Road and Toll way Authority (SRTA) of Georgia is planning a high-occup

Question

The State Road and Toll way Authority (SRTA) of Georgia is planning a high-occupancy toll (HOT) lane project along the Northwestern corridor of 1-75 to reduce congestion and increase traffic throughput during rush hours. This project is expected to increase the average speed during rush hours. The following two alternatives have been identified, and you, as an intern of SRTA, are asked to compare the benefits and costs of these alternatives and select the better alternative using Benefit/Cost Analysis. The interest rate is 4%, and the life of the project is estimated to be 40 years.

Explanation / Answer

Alternative A Alternative B Travel time savings 1200000 40 48000000 Travel time savings 1800000 40 72000000 decrease in travel time each year 10000 40 400000 decrease in travel time each year 12000 40 480000 47600000 71520000 Public health cost savings 750000 40 30000000 Public health cost savings 1000000 40 40000000 1.020196241 750000 765147.1805 1.020196241 1000000 1020196.241 total savings 78365147.18 total savings 112540196.2 salavage value 1500000 salavage value 3000000 total saving and cash flow 79865147.18 total saving and cash flow 115540196.2 total cost annual O&M costs 1000000 40 40000000 total cost 850000 40 34000000 Interest cost 480000 40 19200000 Interest cost 880000 40 35200000 total benefits 20665147.18 total benefits 46340196.24 cost of installation 12000000 cost of installation 22000000 net savings 8665147.181 net savings 24340196.24

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