A new 4-mile long elevated roadway is constructed to give a direct traffic route from a major residential area over a swamp area to the industrial complex of a city. At present, those traveling from the residential area must take a 15-mile circuitous route either to the north or to the south of the swamp area. The travel time and cost is about the same for both. There are currently 3,000 vehicles on the north route and 4,000 on the south route on a daily basis. The new roadway is designed for a 30-year service-life and be tolled, which involves $40 million for construction and an additional $150,000 per year for toll collection. The toll rate is set at 60 cents per vehicle. Upon opening to traffic, the new roadway is expected to carry 20,000 vehicles per day. Those using the new roadway will drive an average of 2 miles to get to the entrance. Road maintenance costs in the county average $20,000 per mile per year. If vehicle operating costs average 14 cents per mile and the highway department uses an annual nominal discount rate of 5%, compounded continuously (i.e., compounded infinite times per year), what is the NPV of the project?
A new 4-mile long elevated roadway is constructed to give a direct traffic route from a major residential area over a swamp area to the industrial complex of a city. At present, those traveling from the residential area must take a 15-mile circuitous route either to the north or to the south of the swamp area. The travel time and cost is about the same for both. There are currently 3,000 vehicles on the north route and 4,000 on the south route on a daily basis. The new roadway is designed for a 30-year service-life and be tolled, which involves $40 million for construction and an additional $150,000 per year for toll collection. The toll rate is set at 60 cents per vehicle. Upon opening to traffic, the new roadway is expected to carry 20,000 vehicles per day. Those using the new roadway will drive an average of 2 miles to get to the entrance. Road maintenance costs in the county average $20,000 per mile per year. If vehicle operating costs average 14 cents per mile and the highway department uses an annual nominal discount rate of 5%, compounded continuously (i.e., compounded infinite times per year), what is the NPV of the project?
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
