Reference no: EM13882076
The Georgia Transportation Directorate is considering a public-private partnership with Young Construction as the prime contractor using a DBOMF contract for a new 22.51-mile toll road on the outskirts of Atlanta's suburban area. The design includes three 4-mile-long commercial/ retail corridors on both sides of the toll road. Highway construction is expected to require5 years at an average cost of $3.91 million per mile. The discount rate is 4% per year, and the study period is 30 years.
Evaluate the economics of the proposal using (a) the modified B/C analysis from the State of Georgia perspective and (b) the profitability index from the Young corporate viewpoint in which disbenefi ts are not included.
Initial investment: $88 million distributed over 5 years; $4 million now and in year 5 and $20 million in each of years 1 through 4.
Annual M&O cost: $1 million per year, plus an additional $3 million each fi fth year, including year 30.
Annual revenue/benefi ts: Include tolls and retail/commercial growth; start at $2 million in year 1, increasing by a constant $0.5 million annually through year 10, and then increasing by a constant $1 million per year through year 20 and remaining constant thereafter.
Estimable disbenefits: Include loss of business income, taxes, and property value in surrounding areas; start at $10 million in year 1, decrease by $0.5 million per year through year 21, and remain at zero thereafter.
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