A city is deciding whether it makes sense to invest in a light rail line. Engineers have projected that if the rail line were to be built, once completed it would reduce travel time for 2,000 commuters by 60 minutes per day (for each workday). The line will take four years to build. The costs of construction are projected to equal $25,000,000 per year, and the costs of operating the line are assumed to equal $2,000,000 per year. Assume that the project is to be evaluated over a 20 year time horizon, and Evermore uses its borrowing rate of 3% as the discount rate.

1. Assume that time is valued at $20 per hour per commuter. There are 5 workdays per week in a 52 week year. Calculate the monetary value of the reduced commute time projected to result from construction of the light rail line.
2. Using the spreadsheet template that is provided, calculate:
   1. the net present value of the project;
   2. The benefit-cost ratio.

	Years	1	2	3	4	5
Discount Rate
Value of Time per Hour
Annual Value Reduced Commuting Time
Present Value Reduced Commuting Time
Annual Capital Costs
Annual Operating Costs
Total Annual Costs
Present Value of Costs
Annual Net Benefits
Present Value of Net Benefits
Benefit-Cost Ratio

1. Now suppose that Evermore seeks federal funding for the project, and is told that in evaluating the project it needs to use the discount rate recommended by OMB for infrastructure projects. How would this change your results?