Engineering Economy 7th Edition by Leland Blank ,Anthony Tarquin

Exercise 70

Two routes are under consideration for a new interstate highway. The long intervalley route would be 25 kilometers in length and would have an initial cost of $25 million. The short transmountain route would be 10 kilometers long and would have an initial cost of $45 million. Maintenance costs are estimated at $150,000 per year for the long route and $35,000 per year for the short route. Regardless of which route is selected, the volume of traffic is expected to be 400,000 vehicles per year. If the vehicle operating expenses are assumed to be $0.30 per kilometer, determine which route should be selected on the basis of
a) conventional B/C analysis and b) modified B/C analysis. Assume an infinite life for each road, and use an interest rate of 8% per year.