Bigstate's highway department must select projects to be built during the coming year. Eleven projects have passed
Question:
Bigstate's highway department must select projects to be built during the coming year. Eleven projects have passed the preliminary screening (see Table 47-1). Five projects have mutually exclusive alternatives (for example A1, A2, and A3 are mutually exclusive alternatives for Project A). Each project and its alternatives must be evaluated at a 10% discount rate. The best set must be selected within a budget constraint of $36 million for the first year's construction cost. For this analysis all projects and alternatives can be assumed to have a life of 20 years. Political considerations require that at most one project of A and C be selected. Similar considerations require that at least three projects be selected from projects A, B, D, F, H, and J. One of the biggest problems you have is that the Commissioner has identified the value for saving a human life with a range of $100,000 to $500,000, rather than a single value. Similarly, the department has determined that preventing a serious injury has a value between one-quarter and two-thirds of the value of a saved life.1 What projects do you recommend?