Reference no: EM131553940

A new road is being proposed to create a shortcut from a major residential area to an industrial complex 15 miles away. The current drivers with an AADT of 10,000 travel 27 miles each direction on a curvy, hilly road to the industrial park. Many do not go to the shopping center near the industrial park because of the present substandard road. The new alignment would put a new bridge over the river and cross some wetlands to shorten the distance to 16 miles. The AADT is expected to increase to 12,000. The cost of the new highway will be $80 million, including the bridge. Some rehabilitation estimated at $5 million would have to be done by the state transportation agency on the existing road in 10 years, if the new road is not built. If the new road is built, the old road will be turned over to the local governments. The maintenance cost will decrease from $300,000 per mile on the old road to $250,000 per mile on the new road. When costs of gasoline and time are included, the cost to the present users is $7.50 per trip. When the new road opens up, it will be $5.50 per trip. Because of the new road, the residential area is expected to grow faster. Traffic is expected to increase by 500 new users per year. The road will be designed to last for 20 years. Use a discount rate of 5% to compute net present worth, benefit-to-cost ratio, and net equivalent uniform annual benefit.