The Tabora – Mpanda road is a gravel road which is passable with difficulties especially during...

The Tabora – Mpanda road is a gravel road which is passable with difficulties especially during the rain season. Now the Government plans to upgrade it to a tarmac level. You have been requested to undertake a benefit – cost analysis of this project. Outline the steps you would follow to undertake the exercise. In each step identify the kind of data and information you would require to carry out the exercise.

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Expert Solution

Tabora-Mpanda Road is passable with difficulties. It is even more severe during rainy season. Now government plans to upgrade it. The cost benefit analysis would be:

Cost involved in the project could be:

Direct cost of raw material, labour.
Indirect cost include rental cost of road rollers and machines needed.
Opportunity cost if the money and man power were invested in this road building and benefits if invested in any other project.
Intangible cost such as extra man power needed in case of late running project, order to extend the road (lets say extend the width of road) and many more.

Benefits from the project could be:

Toll tax gathered from using the road by people.
Increasing welfare of society.
Reducing time spending to cross the cost and invest the time saved in some fruitful things.
Increased safety on roads and declining accidents.

In this Cost Benefit analysis, if according to authorities Cost > Benefit then the road must not be built otherwise it must be built.

Rahul Sunny answered 1 year ago

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