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In: Economics

9-41 A do-nothing and two mutually exclusive alternatives are being considered for reducing traffic congestion. User...

9-41 A do-nothing and two mutually exclusive alternatives are being considered for reducing traffic congestion. User benefits come from reduced congestion once the project is complete, while user disbenefits are due to increased congestion during construction. The interest rate is 8%, and the life of each alternative is 15 years. Which alternative should be chosen?

Alternative A B

User benefits ($M/yr) 2.1 2.6

User disbenefits ($M) 1.2 2.1

First cost ($M) 6.9 9.9

(a) Use the benefit-cost ratio.

(b) Use the modified benefit-cost ratio.

(c) Use the public/government version of the B/C ratio.

Operations and maintenance ($M/yr) 0.75 0.825

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