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An existing two-lane highway between two cities is to be converted to a four-lane divided freeway. The distance between them is 10 miles. The average daily traffic on the new freeway is forecast to average 20,000 vehicles per day over the next 20 years. Trucks represent 5% of the total traffic. Annual maintenance on the existing highway is $1,500 per lane-mile. The existing accident rate is 4.58 per million vehicle miles (MVM). Three alternative plans of improvement are now under consideration.
Plan A: Add two lanes adjacent to the existing lanes at a cost of $450,000 per mile. It is estimated that this plan would reduce auto travel time by 2 minutes and truck travel time by 1 minute when compared with the existing highway. The estimated accident rate is 2.50 per MVM, and the annual maintenance is expected to be $1,250 per lane-mile for all four lanes.
Plan B: Improve along the existing alignment with grade improvements at a cost of $650,000 per mile, and add two lanes. It is estimated that this would reduce auto and truck travel time by 3 minutes each compared with current travel times. The accident rate on the improved road is estimated to be 2.40 per MVM, and annual maintenance is expected to be $1,000 per lane-mile for all four lanes.
Plan C: Construct a new four-lane freeway on new alignment at a cost of $800,000 per mile. It is estimated that this plan would reduce auto travel time by 5 minutes and truck travel time by 4 minutes compared with current conditions. The new freeway would be 0.3 miles longer than the improved counterparts discussed in plans A and B. The estimated accident rate for plan C is 2.30 per MVM, and annual maintenance is expected to be $1,030 per lane-mile for all four lanes. If plan C is adopted, then the existing highway will be abandoned with no salvage value.
Incremental operating cost
-Autos 6 cents/mile
-Trucks 18 cents/mile
-Autos 3 cents/minute
-Trucks 15 cents/minute
Average accident cost $1,200
If a 5% interest rate is used, then which of the three proposed plans should be adopted? Base your answer on the individual B/C ratios of each alternative. When calculating these values, consider any annual incremental operating costs due to distance, a user disbenefit rather than a cost.