A project team has been working on a proposal to develop a light rail transit system...

 

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A project team has been working on a proposal to develop a light rail transit system to replace a route bus service operating in part of a city. You have been asked to undertake an economic analysis to determine whether the project is economically viable. Key data for the project is shown in Table 2. The capital cost of the initiative is estimated to be $850 million and as a result of more efficient use of the fleet, operating costs for public transport services are expected to be reduced by $4.5 million per annum. The project will cater for people living in four zones and will have an economic life of 40 years. The ridership and generalised cost figures shown in Table 1 below relate to the morning peak period commute from Zones 1, 2, 3 and 4 to the CBD. As a result of the ridership change there is expected to be an increase in revenue for the public transport system. Assume daily benefits are twice the peak period benefits, weekly benefits are 5.5 times the daily benefit and yearly benefits are 48 times the weekly benefit. The government is currently using a discount rate of 3 per cent. Table 2: Summary of Project Data Zone 1 Zone Zone 3 Zone 4 Generalised cost for Travellers - Existing public transport service (bus service) - Light Rail Transit Ridership - Existing public transport service (bus service) - Light Rail Transit Fare (same for both systems) $7.85 $6.20 $5.50 $4.60 $5.70 $4.20 $3.90 $3.50 4,700 5,600 6,500 8,500 6,300 $5.00 7,600 $5.00 8,900 $5.00 9,900 $5.00 Determine the benefit cost ratio for the project and indicate whether the project is economically viable. A project team has been working on a proposal to develop a light rail transit system to replace a route bus service operating in part of a city. You have been asked to undertake an economic analysis to determine whether the project is economically viable. Key data for the project is shown in Table 2. The capital cost of the initiative is estimated to be $850 million and as a result of more efficient use of the fleet, operating costs for public transport services are expected to be reduced by $4.5 million per annum. The project will cater for people living in four zones and will have an economic life of 40 years. The ridership and generalised cost figures shown in Table 1 below relate to the morning peak period commute from Zones 1, 2, 3 and 4 to the CBD. As a result of the ridership change there is expected to be an increase in revenue for the public transport system. Assume daily benefits are twice the peak period benefits, weekly benefits are 5.5 times the daily benefit and yearly benefits are 48 times the weekly benefit. The government is currently using a discount rate of 3 per cent. Table 2: Summary of Project Data Zone 1 Zone Zone 3 Zone 4 Generalised cost for Travellers - Existing public transport service (bus service) - Light Rail Transit Ridership - Existing public transport service (bus service) - Light Rail Transit Fare (same for both systems) $7.85 $6.20 $5.50 $4.60 $5.70 $4.20 $3.90 $3.50 4,700 5,600 6,500 8,500 6,300 $5.00 7,600 $5.00 8,900 $5.00 9,900 $5.00 Determine the benefit cost ratio for the project and indicate whether the project is economically viable.

Answer rating: 100% (QA)

Particulars Zone 1 Zone 2 Zone 3 Zone 4 Total Generallized cost for travellers Exsisting Bus Service ... View the full answer