why do we have benefit costs in year zero shouldnt we only have costs is the 197,500 M number correct? Line 31 of spreadsheet - NEt benefits. Thanks again !

Solution:Cost of material = $80 million Average labor cost = $25 per hour Total labor hours required = 750,000 Maintainance cost each year = $8,000,000 Expected life saved per year = 5 Expected earnings each person will accumulate in its life = $4million Time saved = 30 min per trip Expected trip per year = 1,000,000 Average salary of a driver per year = $70,000 Total working hours of each driver per year = 2,000 Discount rate = 4% (Amt. in Million $) year 0 Initial costs:Cost of material Total labor cost 2 3 4 $(80,000,000.00) $(18,750,000.00) Total initial costs 1 $(98,750,000.00) Maintainance cost per year $(8,000,000.00) $(8,000,000.00) $(8,000,000.00) $(8,000,000.00) $20,000,000.00 $1,050,000,000.00 $20,000,000.00 $1,050,000,000.00 $20,000,000.00 $1,050,000,000.00 $20,000,000.00 $1,050,000,000.00 $(197,500,000.00) 1 $1,062,000,000.00 0.95 $1,062,000,000.00 0.91 $1,062,000,000.00 0.86 $1,062,000,000.00 0.82 $(197,500,000.00) $3,568,299,435.42 $1,011,428,571.43 $963,265,306.12 $917,395,529.64 $873,710,028.23 Expected savings per year:Value of life saved Drivers opportunity cost Net benefit Present value factor @4% Present value of net benefits NPV Cost benefit analysis shows that state of illinois must go for this project as it is yielding a very high amount of positive NPV. Expected earnings each person will accum Expected life saved per year = 5 Value of life saved $4,000,000.00 5 $20,000,000.00 Explanation for opportunity cost: Expected trips per year 1,000,000 Time saved per trip 30 minutes Total amount of time saved 30,000,000.00 Average salary of a driver per year $70,000.00 Total working hour of a driver 2,000.00 Average salary per hour for the driver 35.00 Opportunity cost for the driver is that cost of driver will decrease as the destination can be reached before 30 minutes per trip. Opportunity cost $1,050,000,000.00