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The city council is still conducting a cost-benefit analysis for a new bridge, but it is now estimated that drivers will not save any time
The city council is still conducting a cost-benefit analysis for a new bridge, but it is now estimated that drivers will not save any time driving. All other estimates remain unchanged:
- The construction materials for the bridge will cost $80 million upfront.
- The maintenance costs are estimated at $7 million per year for the life of the bridge.
- The hourly wage for construction workers on this project is $19.50 per hour. These workers could have earned $15.50 in other jobs in the community and will spend 0.5 million hours completing the project.
- The new bridge is expected to save two lives each year, and individuals estimate the value of a life at $9 million on average.
- To find the discount rate use this infomration: the before tax return to a firm is 14%.
Determine the net benefit/cost of the project. Should the city council approve the project?
To save you time, simply list the calculated benefits, then list calculated costs and the net of the two.
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