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Chapter 6

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14 views4 pages

Chapter 6

Uploaded by

Kebede Haile
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOC, PDF, TXT or read online on Scribd
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Exercise 1: Evaluation of Transport Alternatives

Check the viability of the project


given below
Existing situation:
o L (A-B) = 43 km
o T (AB)=60 min
 Planned situation (new road):
o L(A-B)=29 km
o T(A-B)= 25 min
 Existing traffic A-B:: (10,000 veh/day), 14 km and 35 minutes
 Accident costs: 200,000 Birr per accident
 Accident rates existing road: 1.5 accidents per 1 mill vehicle kilometers
 Accident rate for planned road: 0.3 accidents per 1 mill vehicle kilometers
 Maintenance cost existing road: 1,500 birr per km per year
 Maintenance cost planned road: 500 birr per km per year
 Investment cost for planned road: 2,000 birr per meter new road.
 Construction period 3 years. Costs equally distributed over construction period.
 Construction period 2004-2006
 Year of comparison: 2007
 No yearly growth in existing traffic after new road is opened
 No new traffic volume is induced.
Assume Value of time = 5 Birr/hr.
Assume Driving Costs = 0.05 Birr/km
Assume lifetime of new road also 25 years (no residual value)
Discount rate: 5%

ASTU/Elias L Page 1
Solutions
1. Total benefit and NPV
 Total benefit = User direct benefit + Accident benefit + Maintenance
benefit.
2. User benefit for existing traffic at end of 2006
a. Direct Benefits
i) Time saving (Reduction in travel cost)

= 5 birr/hr * 35 min * * 365 days x 10,000

= 10.466 Million birr per year


ii) Vehicle operating cost saving

= 14km * 0.05 x 10,000 * 365 days

= 2.555 Million birr per year


Total Benefits=10.464 Million birr + 2.555 Million birr = 13.201 Million birr
b. Indirect Benefits
i) Reeducation in accidents
 Accident cost for existing road

= 1.5 * * 43 km * 10,000 * 365 days * 200,000

= 47.085 Million birr per year


 Accident cost for the planned road
a) New planned traffic

ASTU/Elias L Page 2
= * 29 km * 10,000 * 365 day * 200,000

= 6.351 Million birr per year


Accident cost benefit = 47.085 – 6.35 = 40.735 Million birr per year
ii) Maintenance cost benefit
For existing road

= 1500 * 43 km = 0.064500 Million birr per year

For planned road

= 500 * 29km = 0.014500 Million birr per year

Saving in maintenance cost


= 0.064500 - 0.014500 Million birr per year = 0.05 Million birr per year
Total user benefit= (10.466+2.555 + 40.735 + 0.05 =53.81
Million per year
 Total cost ( investment cost )

= 2,000 * * 29 km = 58 Million birr

Distributing this over the three construction period year

= = 19.333 Million per year

With a rate of 5% interest rate (discount rate) this yearly amount of money is
=19.333 / (1+.05) =18.41 Million
ASTU/Elias L Page 3
Costs (out Benefits Benefits-costs (Net Values of 1 at 5% Discounted Net
Year
flo ws) (inflow) Cash Flows) Discount Rate Cash Flows

2004 19.33 0 -19.33 0.952380952 -18.40952381


2005 19.33 0 -19.33 0.907029478 -17.53287982
2006 19.33 0 -19.33 0.863837599 -16.69798078
2007 0 53.81 53.81 0.822702475 44.26962017
2008 0 53.81 53.81 0.783526166 42.16154302
2009 0 53.81 53.81 0.746215397 40.15385049
2010 0 53.81 53.81 0.71068133 38.24176237
2011 0 53.81 53.81 0.676839362 36.42072607
2012 0 53.81 53.81 0.644608916 34.68640578
2013 0 53.81 53.81 0.613913254 33.03467217
2014 0 53.81 53.81 0.584679289 31.46159255
2015 0 53.81 53.81 0.556837418 29.96342147
2016 0 53.81 53.81 0.530321351 28.53659188
306.2898016

ASTU/Elias L Page 4

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