Homework 5: Transportation System and Project Evaluation

CAE544 Urban Transportation Planning

1. (20 points) A proposal is being considered to improve an existing road connecting two medium-sized cities to reduce transportation costs. The project cost is $2,000,000. Present annual transportation costs for all traffic amount to $2,540,000 per year and would continue if no improvement is made. After the improvement, annual transportation costs are estimated to be $2,350,000. Assume the project service life is 20 years and minimum acceptable rate of return is 12 percent. Should the project be undertaken? Evaluate this proposal by using the net present value method, benefit-to-cost ratio method, and internal rate of return method, respectively.

• (60 points) A municipal ferry system crossing the bay at a costal city handles an average daily volume of 4,000 vehicles, of which 25 percent is trucks and the reminder cars. The crossing takes 20 minutes and an average wait for the ferry is 15 minutes. There is a $0.5 toll per vehicle. Then annual operating disbursements for the ferry system, such as fuel, maintenance, repairs, wages, etc., total $500,000. The system could be sold, as is, to other communities for a total of $700,000. Otherwise, the remaining economic life is 30 years with zero salvage value.

The future traffic and the average wait time are expected to grow by 1 percent per year compound, respectively.

The waiting time is estimated to cost $8.00 per hour for trucks and $4.00 for cars. The stop-and-start cost is estimated to be 1.0 cent for trucks and 0.5 cent for cars, and the operating costs are 40 cents and 10 cents per mile, respectively.

A tunnel has been proposed to eliminate the ferry system. Cars and trucks could drive the 1-mile crossing at 40 mph without stopping. The present total traffic is estimated at 6,000 vehicles, consisting of the 4,000 vehicles that use the ferry plus 2,000 private vehicles (all are cars) that presently avoid the ferry by driving 7 miles around the bay at an average speed of 30 mph. This route would include five traffic stop-starts, each averaging 30 seconds.

The tunnel would cost $32,000,000, with a 30-year economic service life and zero salvage value. The annual maintenance and repair would total $60,000 with annual operating disbursements of $90,000. The toll charges for the tunnel would be $0.40 per car and $0.75 per truck. If the discount rate is 6.5 percent, what action should be taken? Conduct the analysis based on the benefit-to-cost ratio method.   

Hint: Use concept of consumer plus, B/C = (Annual user cost for ferry - Annual user cost for tunnel + Annual consumer plus)/(Annual operating cost for Tunnel – Annual operating cost for ferry). 

3. (20 points) Recommend which of the three following alternative routes is most economical from the standpoint of engineering economics, using the rate-of-return method of analysis

1. When the minimum attractive rate of return (MARR) is 9 percent, and
   1. When the minimum attractive rate of return (MARR) is 5 percent.

Assume an analysis period of 20 years with zero salvage value.

*Note: The maintenance costs for the proposed routes include the costs of maintenance of existing highway in order to keep it in service.