The plan which is preferable by benefit cost ratio analysis.
Answer to Problem 88P
The Plan 3 is preferable as benefit cost ratio is maximum for the Plan 3.
Explanation of Solution
Given:
The cost saving percentage per vehicle minute for autos is
The cost saving percentage per vehicle minute for trucks is
The annual maintenance for existing highway is
The average accident cost is
For plan
The annual maintenance cost is
Estimated accident rate is
For plan
The annual maintenance cost is
Estimated accident rate is
For plan
The annual maintenance cost is
Estimated accident rate is
There are average
Capital improvement investment can be secured at
Concept used:
Write the expression for annualized capital cost.
Here, the total cost is
Write the expression for cost saving.
Here, the cost saving percentage per vehicle minute is
Write the expression for saving in maintenance.
Here, the annual maintenance cost for existing highway is
Write the expression for saving in accidents.
Here, the annual accident for existing highway is
Calculations:
Consider Plan 1.
Calculate operating cost of auto.
Calculate operating cost of truck.
Calculate total cost saving for auto due to reduction in travel time.
Substitute
Calculate total cost saving for truck due to reduction in travel time.
Substitute
Calculate total saving in maintenance cost.
Substitute
Calculate saving in accident reduction.
Substitute
Calculate the value of
Calculate the annualized capital cost.
Substitute
Calculate total annual cost.
Calculate total annual benefit.
Calculate benefit cost ratio.
Consider Plan 2.
Calculate operating cost of auto.
Calculate operating cost of truck.
Calculate total cost saving for auto due to reduction in travel time.
Substitute
Calculate total cost saving for truck due to reduction in travel time.
Substitute
Calculate total saving in maintenance cost.
Substitute
Calculate saving in accident reduction.
Substitute
Calculate the value of
Calculate the annualized capital cost.
Substitute
Calculate total annual cost.
Calculate total annual benefit.
Calculate benefit cost ratio.
Consider Plan 3.
Calculate operating cost of auto.
Calculate operating cost of truck.
Calculate total cost saving for auto due to reduce in travel time.
Substitute
Calculate total cost saving for truck due to reduce in travel time.
Substitute
Calculate total saving in maintenance cost.
Substitute
Calculate saving in accident reduction.
Substitute
Calculate the value of
Calculate the annualized capital cost.
Substitute
Calculate total annual cost.
Calculate total annual benefit.
Calculate benefit cost ratio.
Conclusion:
Thus, Plan 3 is preferable as benefit cost ratio is maximum for the Plan 3.
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Chapter 9 Solutions
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