(20 Marks) A new suburban development project is being planned to the west of Monterrey, Mexico....

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(20 Marks) A new suburban development project is being planned to the west of Monterrey, Mexico. There is currently a two-lane road from the site of the development along the base of the mountain Cerro de la Silla (Saddle Hill). The new development will require additional road capacity. Two alternatives are being considered. The first is to upgrade the existing road to four wide modem lanes. The second is to build a new four-lane highway east through Saddle Hill tunnel. The following data are available concerning the two routes: Route Distance First cost (pesos) Operating and Maintenance Costs per Year (pesos) 900 000 Base of 20 km 210 million mountain Tunnel 10 km 450 million 1 300 000 The planning period is 40 years for both routes. The MARR is 10 percent. Cars will travel at 100 kilometres per hour along either route. Operating cost for the cars is expected to be about 2.50 pesos per kilometre along either route. About 400 000 trips per year are expected on either route. a) Which route should be built? Use only the data given. Use annual worth to make your decision b) What important benefit of the Saddle Hill tunnel route has been left out of the analysis? c) Do you need more information about travellers to determine if the benefit that has been left out of the analysis from part (b) would change the recommendation? Explain. d) How would the possibility of collecting a toll on the tunnel route affect your recommendation? (20 Marks) A new suburban development project is being planned to the west of Monterrey, Mexico. There is currently a two-lane road from the site of the development along the base of the mountain Cerro de la Silla (Saddle Hill). The new development will require additional road capacity. Two alternatives are being considered. The first is to upgrade the existing road to four wide modem lanes. The second is to build a new four-lane highway east through Saddle Hill tunnel. The following data are available concerning the two routes: Route Distance First cost (pesos) Operating and Maintenance Costs per Year (pesos) 900 000 Base of 20 km 210 million mountain Tunnel 10 km 450 million 1 300 000 The planning period is 40 years for both routes. The MARR is 10 percent. Cars will travel at 100 kilometres per hour along either route. Operating cost for the cars is expected to be about 2.50 pesos per kilometre along either route. About 400 000 trips per year are expected on either route. a) Which route should be built? Use only the data given. Use annual worth to make your decision b) What important benefit of the Saddle Hill tunnel route has been left out of the analysis? c) Do you need more information about travellers to determine if the benefit that has been left out of the analysis from part (b) would change the recommendation? Explain. d) How would the possibility of collecting a toll on the tunnel route affect your recommendation?

Answer rating: 100% (QA)

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