Economic Analysis in Transportation Systems CE 7640: Fall 2002 Prof. Tapan K. Datta, Ph.D., P.E.

Example Problem A $3 million road improvement project for 10 mile stretch of a road is to be evaluated to find the Benefit-Cost ratio. The following data is available: Period Travel Speed Crash Frequency Maintenance Cost Operating Cost Average Number of stops per mile per vehicle Peak Hour Off Peak Hour PDOINJURY Before15 mph 30 mph30050$10,000/mile$8000/mile1 After20 mph 35 mph25020$5000/mile$9000/mile0.5

Assumptions 1.Service life = 10 years 2.Vest charge rate = 6% 3.Salvage value = 0 4.Peak hour traffic = 2500 vph 5.Off peak hour traffic = 1200 vph 6.Average car size is medium

Solution For Before Period: Total annual peak hour travel time = (10/15)*(2500)*(52*5*2) vehicle-hours = 866,666.7 vehicle-hours Total annual off-peak hour travel time = (10/30)*1200*[(24*365) - (52*5*2)] = 3,296,000 vehicle-hours For After Period: Total annual peak hour travel time = (10/20)*(2500)*(52*5*2) vehicle-hours = 650,000 vehicle-hours Total annual off-peak hour travel time = (10/35)*1200*[(24*365) - (52*5*2)] = 2,825,142.8 vehicle-hours

Annual Travel Time Savings Total Travel Time saved = (866, ,296,000) – (650, ,825,142.8) = 687,523.9 vehicle-hours Assume an average vehicle occupancy rate of 1.1 for medium sized cars. Total person-hours saved = 687,523.9*1.1= 756,276.3 person-hours Assuming a $7 value for each person-hour, Dollar value of travel time saved = $7*756,276.3 = $5,293,934 per year

Savings in Accident Cost PDO Savings = $6,400*(300–250) = $320,000 Injury Savings = $35,300*(50-20) = $1,059,000

Savings in Fuel Consumption Reduction in number of stops = (1-0.5)*10 per vehicle = 5 per vehicle Therefore, total annual reduction in number of stops = 5*[2500*(52*5*2)+1200*((24*365)-(52*5*2))] = 55,940,000 Assuming an average consumption of gasoline of 1/30 gallon per stop and cost of gasoline as $1.50 per gallon, savings in fuel consumption = $1.50*55,940,000*(1/30) = $2,797,000 per year

Savings in Vehicle Operation & Maintenance Cost Assuming a savings of 1 cent per mile per vehicle hour, total annual savings in vehicle operating cost = $0.01*[2500*(52*5*2)+1200*((24*365)-(52*5*2))]*10 = $1,118,800 Savings in maintenance cost = $(10,000-5,000)*10 = $50,000 Savings in road operating cost = $(8,000-9,000)*10 = -$10,000

Total Annual Benefit Total annual benefit = (5,293, , ,059, ,797, ,118, ,000 – 10,000) = $10,628,734

Total Annual Cost Total annual cost = $(3,000,000)*(CR) = $3,000,000* =$407,604 6% 10

Benefit-Cost Ratio B/C = $10,628,734 / $407,604 = 26.1:1

Sensitivity Analysis To check whether the assumptions are valid: Assuming the value of time as equal to the minimum wage rate of $5.65 per hour, dollar value of travel time saved = $5.65*756,276.3 = $4,272,961 B/C = $4,272,961 / $407,604 = 10.5:1 Therefore, the assumption was valid.