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In: Civil Engineering

DOT wants to install a traffic signal at a dangerous intersection on US-51. The traffic signal...

DOT wants to install a traffic signal at a dangerous intersection on US-51. The traffic signal will cost $450,000. Based on historical data, it will eliminate, on average, one fatal accident every 10 years, but will cause 5 additional minor accidents every year. The standard cost assigned to fatal accidents is $12,300,000 and the cost assigned to minor accidents is $160,000 each. At an interest rate of 4% per year, does the B/C ratio justify the cost of the signal? Assume a useful life of 30 years for the traffic signal.

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