Reference no: EM13881581

Although the lower Rio Grande is regulated by the Elephant Butte Dam and the Caballo Reservoir, serious flooding has occurred in El Paso and other cities located along the river. This has required homeowners living in valley areas near the river to purchase flood insurance costing between $145 and $2766 per year. To alleviate the possibility of fl ooding, the International Boundary and Water Commission undertook a project costing $220 million to raise the levees along fl ood-prone portions of the river. As a result, 13,000 properties were freed of the federal mandate to purchase fl ood insurance. In addition, historical records indicate that damage to infrastructure will be avoided, which amounts to an average benefi t of $8,200,000 per year. If the average cost of fl ood insurance is $460 per household per year, calculate the benefit-to-cost ratio of the levee-raising project. Use an interest rate of 6% per year and a 30-year study period.