Question
Imagine that you are the governor of Florida and need to decide if you should support the Super Bowl highway and bridge construction project. The
Imagine that you are the governor of Florida and need to decide if you should support the "Super Bowl" highway and bridge construction project. The Super Bowl is estimated to take 5 years to complete. The project will require $100 million in construction materials per year and $100 million in labor costs per year. In addition, the construction will disrupt transportation within the city for the duration of the construction. The transportation disruption lengthens transport times for 100,000 workers by 25 hours per year. All workers are paid $30 per hour.
Additionally, $5 million will be required annually to maintain the "Super Bowl" highway in year 6 and after (treat this as an over-time perpetual negative benefit in the calculation).
The Super Bowl, when finished, will ease transportation within the city. Each of the 100,000 workers will have their transport time reduced by 65 hours per year as compared to the preconstruction transport time. In addition, part of the Super Bowl project involves converting the space formerly taken up by an elevated highway into a large park. The State of Virginia has determined that each worker will value the park at $200 per year. We will assume that no one else will use the park. We also assume the government has a 3% discount rate and that the workers live forever. The benefits to the Super Bowl begin in year 6, assuming the project begins in year 1 (i.e., the project runs for 5 years, from t=0 to t=4). Calculate the total cost, total benefit, and net benefit.
Answer using the below format:
Year Discounting Factor Construction and labor costs Time loss Total discounted cost 0 1.00 S 200,000,000 5 75,000,000 5 275,000,000 1 0.97 S 200,000,000 5 75,000,000 5 266,990,291 2 0.94 S 200,000,000 5 75,000,000 5 259,213,875 3 0.92 S 200,000,000 5 75,000,000 5 251,663,956 4 0.89 S 200,000,000 5 75,000,000 5 244,333,938 Total Cost 5 1,297,202,061 Time saving Park Per year 5 195,000,000 5 20,000,000 Overtime S 6,500,000,000 S 666,666,667 Total Benefit 5 7,166,666,667 Net Benefit 5,869,464,606Step by Step Solution
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