Question 26 (20 points) A country is considering upgrading one of its major highways (length = 300 km) that connects it to a neighboring country to improve its road safety and operation performances. This came after a detailed review study which recommended adding extra lanes per direction, raising the median, widening the side shoulders, and installing toll gates. The cost of the project will be $500 million. It will require an annual maintenance of $15 million for repairs and upgrades and is estimated to last 70 years. If the highway is upgraded, it will improve the flow of vehicles between the two countries through reducing the total annual delay time, reducing annual crash frequency for fatal/ injury crashes, and generating a toll revenue of $90 per vehicle. It is estimated that 650,000 vehicles will use the upgraded highway during the first year of operation, while it will increase to reach a total of 700,000 vehicles per year starting year 2 till the end of year 10. The annual traffic volume for the remainder of the service life of the upgraded highway will be 1,000,000 vehicles per year. Assume a minimum rate of return of 9% to proceed with the project and that the annual reductions in crash frequency and total delay time (for all vehicles) are constant during the service life of the project. Determine whether the project is economically justified using the net present value method. Given information: . Existing average fatal/injury crash frequency per year (N) before the upgrade = 7 crashes/ year . CMF (fatal/injury) for the combined effect of upgrading the highway = 0.55 . Total annual delay time reduction (for all vehicles) = 500 hours/ year (constant) . Societal cost of fatal/injury crashes = $160,000 . Unit value of total delay time reduction (for all vehicles) = $600/hour