A secondary road in a developing country, 20 km long is to be improved by surface treating the gravel surface without any change in length. The cost of improvement is estimated at $150,000 per km (specifically, $80,000 per km at the beginning of year 1 and $70,000 per km at the beginning of year 2). Present annual transport costs (vehicle operating costs and maintenance costs, etc.) for all traffic on the existing road is estimated at $210,000 per km per annum. During the 2-year treatment, all traffic need to detour. The detour may cause a higher network-wide cost (transport cost and management cost) which is estimated to be $7,500,000 per annum in total. After improvement, this is expected to reduce to $150,000 per km per annum. If Minimum Attractive Rate of Return is 8% and project life is 20 years after reconstruction with zero salvage value. Resurfacing will be required 10 years after reconstruction at a costs of 50,000 per km. Use the B/C ratio method to determine whether the agency should undertake this project?
A secondary road in a developing country, 20 km long is to be improved by surface treating the gravel surface without any change in length. The cost of improvement is estimated at $150,000 per km (specifically, $80,000 per km at the beginning of year 1 and $70,000 per km at the beginning of year 2).
Present annual transport costs (vehicle operating costs and maintenance costs, etc.) for all traffic on the existing road is estimated at $210,000 per km per annum. During the 2-year treatment, all traffic need to detour. The detour may cause a higher network-wide cost (transport cost and management cost) which is estimated to be $7,500,000 per annum in total. After improvement, this is expected to reduce to $150,000 per km per annum.
If Minimum Attractive
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