Case Study on the California High Speed Rail System Essay

2002 Words Mar 6th, 2012 9 Pages
A Case Study on the California High Speed Rail System (CAHSR) - Is It Feasible?


Hardeep Ramesh, MS ISE

Engineering Economics (ISE 460)

University of Southern California

December 3, 2010


California High Speed Rail (CHSR) system is a mega project planned by the California High Speed Rail Authority (CA HSRA), connecting the major metropolitan areas of California. The project finalized in mid 2000, is estimated to be one of the most expensive of its kind. It is in the lines of the high speed rail systems existing in France, Japan and China. The cost of the total project, which will cover around 800 miles, is estimated to be around $45 billion as of 2008. At this time of economic instability and no proper
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The capital and operating & maintenance costs are much easily determined using the data available from the data from CA HSRA.

Sources of benefits:

1. Intercity passenger revenue; 2. Benefits to both intercity and urban high-speed train passengers (net of fares paid); 3. Reduction of airside delay for air passengers; 4. Reduction in aircraft operating costs; 5. Reduction of highway delay for both intercity and urban auto trips; and 6. Reduction of accident and air pollution costs from intercity and urban auto trips.

This analysis is done assuming the benefits accrued in the year 2050. The costs are evaluated from the year 2011 – the proposed time of starting the project, while the benefits are calculated from the year 2020 – the expected time of launching the project. The estimated streams of benefits and costs occurring each year between 2011 and 2050 were discounted to their present value and summarized to calculate the benefit cost ratio.
The discount rate is a means of calculating a value now of benefits that occur in the future. The discount rate recognizes the time value of money. A four percent real discount rate is used in the calculations. However, the high-speed train project would be economically feasible even under the higher discount rates used by some public agencies and economists. The Internal Rate of Return (IRR) is an evaluation measure that is
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