Cost benefit analysis on proposed project

Reference no: EM1310744

Q1) City of Chicago is considering a railroad track improvement project which is expected to give benefits in form of time savings associated with more immediate transport of people through region. Additionally, project will comprise many railroad grade crossing improvements which are expected to save lives. Cost of materials for project is expected to be= $150 million. Average cost of labour for construction of road is= $20 per hour for 1,000,000 hours of total labour. City will require operating and sustaining railroad that will cost it= $2 million per year. This O&M cost will be flat over a 5 year period. Railroad track project is expected to save sixteen lives per year. On average, people are expected to accrue $2 million in earnings over their life span. By improving railroad track system, it is expected to put aside 15 minutes on average per trip. It is expected that there will be 1,000,000 trips on roads affected by project per year with average salary of= $50,000 per driver based on 2,000 work hours per year. This wage rate is expected to be flat over 5 year period. Suppose a discount rate of 5%, do a cost benefit analysis on this proposed project over a five year period giving a recommendation and numerical explanation for your recommendation.

Reference no: EM1310744

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