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    610 HWset 9 S14

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    deepika
    This document contains 4 examples of benefit-cost analyses of transportation projects. Example 1 compares 4 alternatives using incremental B/C ratios and selects Alternative L as it has the highest incremental B/C ratio above 1. Example 2 uses incremental analysis to compare 2 road projects, selecting Project A as it has an incremental B/C ratio below 1. Example 3 calculates the present worth of benefits and costs of a highway project and does not recommend constructing it as its B/C ratio is below 1. Example 4 compares 3 alternatives using future worth analysis over 20 years and selects Alternative C as it has the highest positive net future worth.

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    610 HWset 9 S14

    Uploaded by

    deepika
    126 views2 pages
    This document contains 4 examples of benefit-cost analyses of transportation projects. Example 1 compares 4 alternatives using incremental B/C ratios and selects Alternative L as it has the highest incremental B/C ratio above 1. Example 2 uses incremental analysis to compare 2 road projects, selecting Project A as it has an incremental B/C ratio below 1. Example 3 calculates the present worth of benefits and costs of a highway project and does not recommend constructing it as its B/C ratio is below 1. Example 4 compares 3 alternatives using future worth analysis over 20 years and selects Alternative C as it has the highest positive net future worth.

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    610-HWset-9-S14

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    This document contains 4 examples of benefit-cost analyses of transportation projects. Example 1 compares 4 alternatives using incremental B/C ratios and selects Alternative L as it has the highest incremental B/C ratio above 1. Example 2 uses incremental analysis to compare 2 road projects, selecting Project A as it has an incremental B/C ratio below 1. Example 3 calculates the present worth of benefits and costs of a highway project and does not recommend constructing it as its B/C ratio is below 1. Example 4 compares 3 alternatives using future worth analysis over 20 years and selects Alternative C as it has the highest positive net future worth.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    126 views2 pages

    610 HWset 9 S14

    Uploaded by

    deepika
    This document contains 4 examples of benefit-cost analyses of transportation projects. Example 1 compares 4 alternatives using incremental B/C ratios and selects Alternative L as it has the highest incremental B/C ratio above 1. Example 2 uses incremental analysis to compare 2 road projects, selecting Project A as it has an incremental B/C ratio below 1. Example 3 calculates the present worth of benefits and costs of a highway project and does not recommend constructing it as its B/C ratio is below 1. Example 4 compares 3 alternatives using future worth analysis over 20 years and selects Alternative C as it has the highest positive net future worth.

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    11.The four mutually exclusive alternatives below are being compared using the B/C method.

    What alternative,
    if any, should be selected?

    Incremental B/C When Compared with


    Initial Alternative
    Alternative Investment B/C Ratio
    J K L M
    J $40K 1.10 -
    K $50K 0.96 0.40 -
    L $66 1.22 1.42 2.14 -
    M $90 0.89 0.72 0.80 0.80 -

    A) Select J B) Select K C) Select L D) Select M


    Ans: C

    25.There are two mutually exclusive road improvement projects that result in the following costs and benefits.

    Data A B
    Annual Maintenance $685,500 $1,030,000
    Costs
    Annual Benefits Through $200,000 $450,000
    Reduction in User Costs

    Which is preferred and why?


    Ans: Use incremental benefit-cost ratio analysis.
    Increment (A up to B).
    Incremental annual maintenance cost (C) = 1,030,000 - 685,500 = $344,500
    Incremental annual user benefit (B) = 450,000 - 200,000 = $250,000
    B/ C = 250,000 / 344,500 = 0.7256
    B/ C < 1. Therefore, program A is preferred.

    27.A transportation agency is considering a highway project that will cost $1.5 million dollars. The annual
    benefits are expected to be $99,000 per year over a twenty year analysis period. Reusable material will
    be valued at $300,000 at the end of the useful life. If the discount rate is 8% per annum, should the
    project be constructed? Use benefit-cost analysis.
    Ans: PW (B) = {A (P/A, i, n)} + {S (P/F, i, n)}
    = (99,000) (P/A, 8%, 20) + (300,000) (P/F, 8%, 20)}
    = (99,000) (9.818) + (300,000) (0.2145)
    = 971,982 + 64,350 = $1,036,332
    PW (C) = $1,500,000
    B/C = PW (B)/PW (C) = 1,036,332 / 1,500,000 = 0.69
    B/C is less than 1 and therefore, do not build.
    49.Given the data for three mutually exclusive alternatives, find the best alternative using Future worth
    Analysis. Assume alternatives are replaced at the end of their useful lives. MARR = 12%.

    Data Alt. A Alt. B Alt. C


    Initial Cost $6,000 $1,000 $1,500
    Uniform Annual Benefit $525 $300 $450
    Useful Life ,Years 20 5 10

    Ans: Net Future worth needs to be computed for each alternative. Analysis Period = 20
    Years.
    Alt. A
    EUAB - EUAC = 525 - 6,000 (A/P, 12%, 20) = 525 - 6,000 (0.1339) = - $278.40
    NFW = - 278.40 (F/A, 12%, 20) = -278.40 (72.052) = - $20,059.28
    Alt. B
    EUAB - EUAC = 300 - 1,000 (A/P, 12%, 5) = 300 - 1,000 (0.2774) = $22.60
    NFW =22.60 (F/A, 12%, 20) = 22.60 (72.052) = $1,628.38
    Alt. C
    EUAB - EUAC = 450 - 1,500 (A/P, 12%, 10) = 450 - 1,500 (0.1770) = $184.50
    NFW = $184.50 (F/A, 12%, 20) = $184.50 (72.052) = $13,293.59
    Choose Alt. C to maximize NFW.

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