An existing two-lane highway between two cities, 10 miles apart, is to be converted to a four-lane divided freeway. The average daily traffic (ADT) on the new freeway is forecast to average 20,000 vehicles per day over the next 20 years. Trucks represent 5% of the total traffic. Annual maintenance on the existing highway is $1500 per lane-mile. The existing accident rate is 4.58 per million vehicle miles (MVM). There alternate plans of improvement are now under consideration.
Plan A: Improve along the existing development by adding two lanes adjacent to the existing lanes at a cost of $450,000 per mile. It is estimated that this plan will reduce auto travel time by 2 minutes and truck travel time by 1 minute. The Plan A estimated accident rate is 2.50 per MVM. Annual maintenance is estimated to be $1250 per lanemile.
Plan B: Improve along the existing alignment with grade improvements at a cost of $650,000 per mile. Plan B would add two additional lanes, and it is estimated that this plan would reduce auto and truck travel time by 3 minutes each. The accident rate on this improved road is estimated to be 2.40 per MVM. Annual maintenance is estimated to be $1000per lanemile.
Plan C: Construct a new freeway on new alignment at a cost of $800,000 per mile. It is estimated that this plan would reduce auto travel time by 5 minutes and truck travel time by 4 minutes. Plan C is 0.3 mile longer than A or B. The estimated accident rate for C is 2.30 per MVM. Annual maintenance is estimated to be $1000per lane-mile. Plan C includes abandonment of the existing highway with no salvage value.
Incremental operating cost
Autos ................................. 6Ф per mile
Trucks ................................ 18Ф per mile
Time saving
Autos ................................. 3Ф per minute
Trucks ................................ 15Ф per minute
Average accident cost ............. $1200
If a 5% interest rate is used, which of the three proposed plans should be adopted?