Question: The State Highway Department is considering a bypass loop that is expected to save motorists $820,000 per year in gasoline and other automobilerelated expenses. However,

The State Highway Department is considering a bypass loop that is expected to save motorists $820,000 per year in gasoline and other automobilerelated expenses. However, local businesses will experience revenue losses estimated to be $135,000 each year. The cost of the loop will be $9,000,000.

(a) Calculate the conventional B/C ratio using an interest rate of 6% per year and a 20-year project period.

(b) Calculate the conventional B/C ratio without considering the disbenefits. Is the project economically justified with and without considering the revenue losses?

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