Recent development near Eugene, Oregon, has identified a need for improved acces

Question

Recent development near Eugene, Oregon, has identified a need for improved access to Interstate 5 at one location. Civil engineers and public planners are considering three alternative access plans. Benefits are estimated for the public in general; disbenefits primarily affect some local proprietors who will see traffic pattern changes as undesirable. Costs are monetary for construction and upkeep, and savings are a reduction in cost of those operations today that will not be necessary in the future. All figures are relative to the present situation, retention of which is still an alternative, and are annualized over the 20-year planning horizon.

Alternative

A

B

C

What is the B/C ratio for each of these alternatives?

Alternative A: ?

Alternative C: ?

Determine the value of B – C for each alternative.

Alternative A: $

Alternative C: $

Using incremental B/C ratio analysis, which alternative should be selected?

Alternative A

Alternatives A, B, and C are equally desirable

Alternative B

Alternative C

Alternative DN

Alternative A or B, as they are equally desirable

Alternative B or C, as they are equally desirable

Alternative A or C, as they are equally desirable

Please show the ratios used to make your decision:

Comparison 1:

Ratio:

Comparison 2:

Ratio:

Comparison 3:

Ratio:

Alternative

A

B

C

Benefits $230,000 $360,000 $480,000 Disbenefits $37,000 $69,000 $102,000 Costs $155,000 $234,000 $342,000 Savings $15,000 $31,000 $42,000

Explanation / Answer

B/C Ratio: (Benefits – Disbenefits) / (Costs – Savings)

Alternative A = ($230,000 - $37,000) / ($155,000 - $15,000) = 1.38

Alternative B = ($360,000 - $69,000) / ($234,000 - $31,000) = 1.43

Alternative C = ($480,000 - $102,000) / ($342,000 - $42,000) = 1.26

Value of B - C: (Benefits – Disbenefits) - (Costs – Savings)

Alternative A = ($230,000 - $37,000) - ($155,000 - $15,000) = $53,000

Alternative B = ($360,000 - $69,000) - ($234,000 - $31,000) = $88,000

Alternative C = ($480,000 - $102,000) - ($342,000 - $42,000) = $78,000

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