PART A PLEASE
You are given the task of deciding between three highway alternatives to replace a winding, old, and dangerous road. The length of the current route is 26 miles. Alternative A is to overhaul and resurface the old road at a cost of $2,200,000. Resurfacing will then be required at a cost of $2 million at the end of each 10-year period. Annual maintenance for Alternative A will cost $8,000/mile. C. Analyze the various benefits in monetary values for 1. Operational costs 2. Time costs 3. Safety costs d. Summarize all relevant government and public costs as in the below table. Alternative B is to cut a new road following the terrain; it will be only 22 miles long. Its first cost will be $8,800,000, and surface renovation will be required every 10 years at a total cost of $1,800,000. Annual maintenance will be $8,000/mile. Route C Alternative C also involves a new highway, for practical considerations, will be built along a 20.5-mile straight line. Its first cost, however, will be $17,300,000, because of the extensive additional excavating necessary along this route. It, too, will require resurfacing every 10 years at a cost of $1,800,000. Annual maintenance will be $15,500/mile. This increase over route B is due to the additional roadside bank retention efforts that will be required. Summary of Annual Equivalent Government and public Costs Route A Route B Government first cost of highway Government cost of highway resurfacing and maintenance Public operational costs Public time costs Public safety costs Total government costs Total public costs Your task is to select one of these alternatives, considering a planning horizon of 30 years with negligible residual value for each of the highways at that time. One of these alternatives is required, since the old road has deteriorated below acceptable standards, Calculate the total EUAC (Equivalent Uniform Annual Cost) of the first cost, resurfacing cost, and maintenance cost of each alternative using an interest rate of 6%. Which alternative associated with the minimum cost? b. Can you now conclude that the answer of part (a) is the option that should be selected? Why? e. Compare these three alternative routes using benefit-cost criteria. Let your criterion be the incremental benefit-cost ratio. Make your comparison on the basis of the present worth of all costs for each highway alternative. Compare the three alternatives using the internal rate of return approach. f. g In fact, you have analyzed only one side of the problem. Now, we must attempt to quantify the benefits along each of the routes. Traffic density along each of the three routes will fluctuate widely from day to day but will average 4000 vehicles/day throughout the year. This volume is composed of 350 light commercial trucks, 250 heavy trucks, 80 motorcycles, and the remainder are automobiles. The average cost per mile of operation for the vehicles is $0.20, $0.40, $0.05, and $0.12, respectively. There will be a time savings because of the different distances along each of the routes, as well as the different speeds which each of the routes will sustain. Route A will allow heavy trucks to average 35 miles/hour, while other traffic can maintain the average speed of 45 miles/hour. Routes B and C will allow heavy trucks to average 40 miles/hour, and the rest of the vehicles can average 50 miles/hour. The cost of time for all commercial traffic is valued at $9/vehicle/hour, and for the noncommercial traffic, $3/vehicle/hour. Twenty-five percent of the automobiles, all the motorcycles, and all the trucks are considered commercial. Finally, there is a significant safety factor that should be included. Along the old winding road, there has been an excessive number of accidents per year. Route A will reduce the number of vehicles involved in accidents to 105, and routes B and C are expected to involve only 75 and 70 vehicles in accidents, respectively, per year. The average cost per vehicle in an accident is estimated to be $4400, considering actual physical property damages, lost wages because of injury, medical expenses, and other relevant costs. You are given the task of deciding between three highway alternatives to replace a winding, old, and dangerous road. The length of the current route is 26 miles. Alternative A is to overhaul and resurface the old road at a cost of $2,200,000. Resurfacing will then be required at a cost of $2 million at the end of each 10-year period. Annual maintenance for Alternative A will cost $8,000/mile. C. Analyze the various benefits in monetary values for 1. Operational costs 2. Time costs 3. Safety costs d. Summarize all relevant government and public costs as in the below table. Alternative B is to cut a new road following the terrain; it will be only 22 miles long. Its first cost will be $8,800,000, and surface renovation will be required every 10 years at a total cost of $1,800,000. Annual maintenance will be $8,000/mile. Route C Alternative C also involves a new highway, for practical considerations, will be built along a 20.5-mile straight line. Its first cost, however, will be $17,300,000, because of the extensive additional excavating necessary along this route. It, too, will require resurfacing every 10 years at a cost of $1,800,000. Annual maintenance will be $15,500/mile. This increase over route B is due to the additional roadside bank retention efforts that will be required. Summary of Annual Equivalent Government and public Costs Route A Route B Government first cost of highway Government cost of highway resurfacing and maintenance Public operational costs Public time costs Public safety costs Total government costs Total public costs Your task is to select one of these alternatives, considering a planning horizon of 30 years with negligible residual value for each of the highways at that time. One of these alternatives is required, since the old road has deteriorated below acceptable standards, Calculate the total EUAC (Equivalent Uniform Annual Cost) of the first cost, resurfacing cost, and maintenance cost of each alternative using an interest rate of 6%. Which alternative associated with the minimum cost? b. Can you now conclude that the answer of part (a) is the option that should be selected? Why? e. Compare these three alternative routes using benefit-cost criteria. Let your criterion be the incremental benefit-cost ratio. Make your comparison on the basis of the present worth of all costs for each highway alternative. Compare the three alternatives using the internal rate of return approach. f. g In fact, you have analyzed only one side of the problem. Now, we must attempt to quantify the benefits along each of the routes. Traffic density along each of the three routes will fluctuate widely from day to day but will average 4000 vehicles/day throughout the year. This volume is composed of 350 light commercial trucks, 250 heavy trucks, 80 motorcycles, and the remainder are automobiles. The average cost per mile of operation for the vehicles is $0.20, $0.40, $0.05, and $0.12, respectively. There will be a time savings because of the different distances along each of the routes, as well as the different speeds which each of the routes will sustain. Route A will allow heavy trucks to average 35 miles/hour, while other traffic can maintain the average speed of 45 miles/hour. Routes B and C will allow heavy trucks to average 40 miles/hour, and the rest of the vehicles can average 50 miles/hour. The cost of time for all commercial traffic is valued at $9/vehicle/hour, and for the noncommercial traffic, $3/vehicle/hour. Twenty-five percent of the automobiles, all the motorcycles, and all the trucks are considered commercial. Finally, there is a significant safety factor that should be included. Along the old winding road, there has been an excessive number of accidents per year. Route A will reduce the number of vehicles involved in accidents to 105, and routes B and C are expected to involve only 75 and 70 vehicles in accidents, respectively, per year. The average cost per vehicle in an accident is estimated to be $4400, considering actual physical property damages, lost wages because of injury, medical expenses, and other relevant costs
