The city council is conducting a cost-benefit analysis for a new bridge. The construction materials for the
Question:
The city council is conducting a cost-benefit analysis for a new bridge. The construction materials for the bridge will cost $100 million. The maintenance costs are estimated at $6 million per year. The hourly wage for construction workers on this project is $20 per hour. These workers could have earned $10 in other jobs in the community and will spend 1 million hours completing the project. The new bridge is expected to save two lives each year, and individuals estimate the value of a life at $9 million on average. It is also expected that drivers will save approximately 200,000 hours of driving time each year. The discount rate is 6%. Determine the net benefit/cost of the project. Should the city council approve the project? (hint: the table is given, please fill in the numbers and show your steps).
ANSWER:
Costs
Materials
Labor
Maintenance
First-year costs
Total cost over time
Benefits
Driving time saved
Lives saved
First-year benefit
Total benefit over time
Net Benefit/Cost