Toll lanes on a section of the 1-40 freeway are being considered in order to reduce traffic congestion and travel times. Since this is a government project, the B-C ratio method must be applied in the evaluation. The following are cost and other estimates: Construction costs = $18,500,000 Operating and maintenance costs = $690,000 per year Projected service life = 20 years Savings in travel times and revenues generated from the tolls = $3,060,000 in the first year of operation and projected to increase by 1.8% per year due to the projected annual increase in traffic. In addition, environmental analysis estimates that the project will result in increased noise and air pollution that will cause an additional societal health cost of $864,000 the first year and is also projected to increase at 1.8% per year. Assuming zero market (salvage) value at the end of 20 years and a MARR of 13% per year, should the toll lanes be constructed? Click the icon to view the interest and annuity table for discrete compounding when the MARR is 13% per year. The conventional benefit-cost ratio of the project with PW is According to the B-C ratio method, the toll lanes should. OA. be constructed OB. not be constructed (Round to two decimal places.)
Toll lanes on a section of the 1-40 freeway are being considered in order to reduce traffic congestion and travel times. Since this is a government project, the B-C ratio method must be applied in the evaluation. The following are cost and other estimates: Construction costs = $18,500,000 Operating and maintenance costs = $690,000 per year Projected service life = 20 years Savings in travel times and revenues generated from the tolls = $3,060,000 in the first year of operation and projected to increase by 1.8% per year due to the projected annual increase in traffic. In addition, environmental analysis estimates that the project will result in increased noise and air pollution that will cause an additional societal health cost of $864,000 the first year and is also projected to increase at 1.8% per year. Assuming zero market (salvage) value at the end of 20 years and a MARR of 13% per year, should the toll lanes be constructed? Click the icon to view the interest and annuity table for discrete compounding when the MARR is 13% per year. The conventional benefit-cost ratio of the project with PW is According to the B-C ratio method, the toll lanes should. OA. be constructed OB. not be constructed (Round to two decimal places.)
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Toll lanes on a section of the 1-40 freeway are being considered in order to reduce traffic congestion and travel times.
Since this is a government project, the B-C ratio method must be applied in the evaluation. The following are cost and other estimates:
Construction costs $18,500,000
Operating and maintenance costs = $690,000 per year
Projected service life = 20 years
Savings in travel times and revenues generated from the tolls = $3,060,000 in the first year of operation and projected to increase by 1.8% per year due to the projected annual increase in traffic.
In addition, environmental analysis estimates that the project will result in increased noise and air pollution that will cause an additional societal health cost of $864,000 the first year and is also
projected to increase at 1.8% per year.
Assuming zero market (salvage) value at the end of 20 years and a MARR of 13% per year, should the toll lanes be constructed?
Click the icon to view the interest and annuity table for discrete compounding when the MARR is 13% per year.
The conventional benefit-cost ratio of the project with PW is
According to the B-C ratio method, the toll lanes should.
OA. be constructed
OB. not be constructed
(...)
(Round to two decimal places.).
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