Engineering Economic Analysis

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Problems 513

project will entirely eliminate both these expenses.

The state estimates th~t the new overpass will save it

about $6000 per year in expenses directly due to the

accidents. The overpass, if built, will belong to the

state.

Should the overpass be built? If the overpass

is built, how much should the railroad be asked to

contribute to the state as its share of the $1,800,000

construction cost?

:0 An existing two-lane highway between two cities,
10 miles apart, is to be converted to a four-lane
divided freeway. The average daily traffic (ADT) on
the new freeway is forecast to average 20,000 vehicles
per day over the next 20 years. Trucks represent 5% of
the total traffic. Annual maintenance on the existirig
highway is $1500 per lane-mile. The existing acci-
d,+rate is 4.58 per million vehicle miles (MVM).
Tlu..:e alternate plans of improvement are now under
consideration.

Plan A:Improve along the existing develop-

ment by adding two lanes adjacent to the ex-

isting lanes at a cost of $450,000 per mile.

It is estimated that this plan will reduce auto

travel time by 2 minutes and truck travel

time by 1 minute. The Plan A estimated

accident rate is 2.50 per MVM. Annual main-

tenance is estimated to be $1250 per lane-

mile.

Plan B:Improve along the existing alignment

with grade improvements at a cost of $650,000

per mile. PlanB would add two additional

lanes, and it is estimated that this plan would

:educe auto and truck travel time by 3 min-

utes each. The accident rate on this improved

road is estimated to be 2.40 per MVM. Annual

maintenanceis estimated to be $1000 per lane-

mile.

PlanC: Construct a new freeway on new align-

ment at a cost of $800,000 per mile. It is es-

timated that this plan would reduce auto travel

time by 5 minutes and truck travel time by 4

minutes.Plan C is 0.3 mile longer thanAorB.

The estimated accident rate for C is 2.30 per

MVM. Annual maintenance is estimated to be

$1000 per lane-mile. Plan C includes abandon-

ment of the existing highway with no salvage

value.

Incrementaloperating cost

Autos

Trucks

Time saving

Autos

Trucks

Averageaccident cost

6 rtper mile

18 rtper mile

3 rtper minute

15 rtper minute

$1200

If a 5% interest rate is used, which of the three pro-

posed plans should be adopted? (Answer:Plan C)

16-21 The local highway department is preparing an eco-

nomic analysis to see whether reconstruction of the

pavement on a mountain road is justified. The number

of vehicles traveling on the road increases each year,

hence the benefits to the motoring public of the pave-

ment reconstruction also increase. Based on a traffic

count, the benefits are projected as follows:

Year

2001

2002

2003

2004

2005

2006

End-of- Year Benefit

$10,000

12,000

14,000

16,000

18,000

20,000

and so on, increasing

$2000 per year

The reconstructed pavement will cost $275,000 when

it is installed and will have a 15-year useful life. The

construction period is short, hence a beginning-of-

year reconstruction will result in the end-of.:year ben-

efits listed in the table. Assume a 6% interest rate.

The reconstruction, if done at all, must be done not

later than 2006. Should it be done, and if so, in what

.year?

16-22 A section of road in the state highway system needs

repair at a cost of $150,000. At present, the volume

of traffic on the road is so low that few motorists

would benefit from the work. However, future traffic

is expected to increase, with resulting increased mo-

torist benefits. The repair work will produce benefits

for 10 years after it is completed. The highway'plan-

ning department is examining five mutually exclusive

alternatives concerning the road repair.

Should the road be repaired and, if so, when

should the work be done? Use a 15% MARR.

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