Reference no: EM13390392

The City of Chicago is considering a railroad track improvement project that is expected to provide benefits in the form of time savings associated with more speedy transport of people through the region. In addition, the project will include many railroad grade crossing improvements that are expected to save lives. The cost of materials for the project is expected to be $150 million. The average cost of labor for construction of the road is $20 per hour for 1,000,000 hours of total labor. The city will need to operate and maintain the railroad which will cost it $2 million per year. This O&M cost will be flat over a five year period. The railroad track project is expected to save 16 lives per year. On average, people are expected to accumulate $2 million in earnings over their life span. By improving the railroad track system, it is expected to save 15 minutes on average per trip. It is expected that there will be 1,000,000 trips on the roads affected by the project per year with an average salary of $50,000 per driver based on 2,000 work hours per year. This wage rate is expected to be flat over a five year period. Assuming a discount rate of 5%, perform a cost benefit analysis on this proposed project over a 5 year period providing a recommendation and numerical justification for your recommendation.