OBLEM Capital cost of a rural highway project is $2.5 million. This project will
ID: 2614367 • Letter: O
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OBLEM Capital cost of a rural highway project is $2.5 million. This project will shorten the road by 2 miles and reduce travel time by an average of 5 minutes. The project is also expected to reduce traffic accidents by an average of 5 per year. The annal maintenance cost is also expected to be reduced by $5,000. The average daily traffic on this road is currently 7,000 vpd, with a vehicle occupancy factor of 1.5 persons per vehicle. Traffic is expected to increase linearly by 2.5 percent over the 5 year life of the project. Vehicle operating costs are 10 cents per mile. Road users value their time at $3.00 per hour. The average cost of a traffic accident is $20,000. Interest rate is 8 percent (a) Determine the travel time benefit per trip, in S (b) Determine the vehicle operating costs savings per trip, in S. (c) Determine the annual benefit from the reduction of accidents, in S (d) Determine the annual maintenance savings, in $? (e) Determine the benefit-to-cost (B/C) ratio of this project. Hint: You may use the table below but you don't have to. Annual Traffic growth Annual plus vehicle operatingmaintenance Annual Present worth Annual travel timeaccidents plus Total Year factor costs savings benefits Benefits of benefits Total present worth of the benefits Nole that the future to present worth factor is (+i Show transcribed image text Capital cost of a rural highway project is 52.5 million. This project will shorten the road by 2 miles and reduce travel time by an average of 5 minutes. The project is also expected to reduce traffic accidents by an average of 5 per year. The annual maintenance cost is also expected to be reduced by 55,000. The average daily traffic on this road is currently 7,000 vpd, with a vehicle occupancy factor of 1.5 persons per vehicle. Traffic is expected to increase linearly by 2.5 percent over the 5 year life of the project. Vehicle operating costs are 10 cents per mile. Road users value their time at $3.00 per hour. The average cost of a traffic accident is $20,000. Interest rate is 8 percent. Determine the travel time benefit per trip, in $. Determine the vehicle operating costs savings per trip, in $. Determine the annual benefit from the reduction of accidents, in S. Determine the annual maintenance savigs,i? Determine the benefit-to-cost (B/C) ratio of this projectExplanation / Answer
1. the travel time benefit per trip : =5/60*3 0.25 per trip 2. The vehicle operating cost per trip : = 2*0.1 0.20 per trip 3. The annual benefit from the reduction of accidents are : 5 x 20,000 $ per accident 100000 $ per year 4. The Annual maintenance cost savings will be : 5000 $ per year 5. Assuming 365 days in a year, the number of vehicles the current number of vehicles per year = 7000 vehicles x 365= 25,55,000 vehicles Year Traffic growth factor Annual trips (Annual travel time + vehicle operating cost ) x annual trips Annual accidents + maintenance benefits Total Annual benefits PV of benefits 1 0.50% 2567775 6,41,944 105000 7,46,944 6,91,615 2 0.50% 2580614 6,45,154 105000 7,50,154 6,43,136 3 0.50% 2593517 6,48,379 105000 7,53,379 5,98,057 4 0.50% 2606485 6,51,621 105000 7,56,621 5,56,139 5 0.50% 2619517 6,54,879 105000 7,59,879 5,17,161 30,06,108 Benefit to cost ratio ( B/C ratio ) 2.5 million = cost 1.20 B/C ratio of this project, hence the project should be accepted.
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