Scheme Appraisal for Highway Projects 55Operation savings (Yr 7) =(0.02955 -0.02773) ¥ 290 ¥ 106
=£527 757
Tr avel time/km(existing route) =1/40
=0.025 hours
Tr avel time/km(upgraded route) =1/85
=0.011765 hours
Value of savings per veh-km =(0.025 -0.0117647) ¥£2.00
=£0.02647
Value of time savings (Yr 7) =0.02647 ¥ 290 ¥ 106
=£7 676 471
Total benefits(Yr 7) =(1 740 000 +527 757 +7 676 471)
=£9 944 228
Discounted benefits(Yr 7) =9 944 229 ∏(1.06)^7
=9 944 229 ∏1.50363
=£6 613 480
These calculated figures are given in row seven of Table 3.3. The results of the
computation of user benefits for all relevant years within the highway’s
economic life are shown in this table. It can be seen that the discounted value
of the total benefits amounts to £65 188 612.
Table 3.4 gives the construction and maintenance costs incurred by the project
over its economic life together with the discounted value of these costs.
As seen from Table 3.4, the total value of the discounted costs of the upgrad-
ing project is estimated at £26 326 133.
The computations contained in Tables 3.3 and 3.4 are used to estimate the
economic worth of the project. This can be done using the three indicators
referred to earlier in the chapter: net present value, benefit/cost ratio and inter-
nal rate of return.
Year Construction and
maintenance costs Discounted costs
(£) (£)
115 000 000 14 150 943
21 0000 000 8 899 964.4
3 500 000 419 809.64
4 500 000 396 046.83
5 500 000 373 629.09
6 500 000 352 480.27
7 500 000 332 528.56
8 500 000 313 706.19
9 500 000 295 949.23
10 500 000 279 197.39
11 500 000 263 393.76
12 500 000 248 484.68
S=26 326 133Table 3.4Valuation of
discounted construction/
maintenance costs