Reference no: EM131593404

Oregon Department of Transportation (ODOT), a public-sector entity, is evaluating two alternate routes to I-5 in the Portland area. Route 105 will cost ODOT $500,000 in initial investment and will cost $10,000 per year to maintain the route. This route will benefit the public and local businesses at $100,000 per year. However, due to the length of the route and other considerations, there will be a toll charged to the users. The toll is estimated to cost the public a total of $2,000 annually. The other route in consideration is Route 305 that will cost ODOT $100,000 more than Route 105. The annual O&M is $5,000 less than Route 105. The public benefit is $15,000 more per year than Route 105. With Route 305 there is no issue of toll to the users. Both options do not have a salvage value. ODOT uses a 5-year planning horizon and 10% MARR to evaluate their projects. Based on the information provided, which alternative should ODOT invest in?