Cost-Benefit Analysis: New Train Station A county government is considering adding a new train station to an existing line, which would accommodate residents of a growing sub-division of the county. County authorities have hired you and your partners from an economic consulting firm to conduct a cost-benefit analysis of the proposed project. Relevant information related to the project include: 1. 680,000 total labor hours for construction -Half of the labor will be hired from other jobs at a market rate of $40 per hour, while the other half will be drawn from the ranks of the unemployed, who are willing to work for $15 per hour. 2. 1 million units of construction materials at a monopoly-market price of $70 per unit, which represents a 40% markup over marginal cost. 3. Annual maintenance costs of $3.2 million, assumed to begin at the end of the first year and to occur indefinitely into the future. 4. Time saving of commuters: It is estimated the approximately 650 local residents will save, on average, 30 minutes a day in commuting time, beginning at the end of the first year and continuing indefinitely. Current, and future, residents are assumed to work 5 days a week, 50 weeks a year, and value an hour of time at $50. 5. Lives saved: Because there will be fewer residents using their cars for commuting, it is assumed that, on average, 1.2 lives will be saved per year, indefinitely, beginning at the end of the first year. A life is estimated to be worth $2 million. Construction of the new station would be completed within the first year (i.e. assume all construction costs are current). In addition, for this project, future values are discounted at 4%. 32 33 Questions: 4a. Enter a formula to calculate only the construction costs (i.e. exclude maintenance costs) of the station. 5 36 57 1 2 3 b. Enter a formula to calculate the present value of maintenance costs of the station over time. 4 5 Bc. Enter a formula to calculate the present value of the total benefits of the station over time. 7 0 2 d. Enter a formula to calculate the overall net benefit of the station. e. Should the county build the station? Briefly explain