MAKERERE UNI

VERSI
TY
COLLEGEOFENGI
NEERI
NG,
DESI
GN,
ARTANDTECHNOLOGY
SCHOOLOFENGI
NEERI
NG
DEPARTMENTOFCI
VILANDENVI
RONMENTALENGI
NEERI
NG
GROUPASSI
GNMENT
CI
V4101:
CIVI
LENGI
NEERI
NGMANAGEMENT
GROUPMEMBERS
SN NAME REG.NUMBER SI
GNATURE

1 ETOTJAMESLUCASODONG 14/
U/1037

2 KEI
JUAKARAMADHAN 14/
U/434

3 KI
BUULEBRI
AN 14/
U/7766/
PSA

4 KI
GGUNDUDOUGLASDAVI
S 14/
U/7801/
PS

5 KI
RENDAVI
OLA 14/
U/470

6 KI
VUMBIDENI
S 14/
U/8089/
PS

7 KI
WANUKAABDUH 14/
U/492

8 KI
WEWARASHI
D 14/
U/8105/
PSA

9 MUTEBIMARKMARTI
N 14/
U/10128/
PSA

10 NAGABARODNEY 14/
U/782

11 NASASI
RAANTHONY 14/
U23773/
PS

12 NALI
NNYAYVONNE 14/
U/839

13 NANFUKAJUSTI
NEGERALDI
NE 14/
U/12524/
PSA

14 ODELLEANDREW 14/
U/1880

15 OCI
ROWI
JOKBRI
AN 14/
U/1031

16 OJANGOLEI
VAN 13/
U/1050

17 OOJARAJEROME 14/
U/1082/
PSA

18 OTI
M JOSHUAAPOLLO 14/
U/1082/
PSA

19 UMUTESISHI
NAI
RENE 14/
U/15665/
PS

20 WAFULADOMI
NICMUGENI 14/
U/1273

21 MUTAKOOHADAVI
D 13/
U/8985/
PSA

LECTURER:
DR.DANSNSHEKANABONATURI
NDA
 1.Anew hi
ghwayhasbeenpr
oposedt
ojoi
nKampal
a-Ent
ebbeataconst
ruct
ion
costof700bi
l
li
onwi
thadesi
gnl
i
feof20y
ear
s.Const
ruct
ionwor
kswi
l
lrequi
re
di
ver
sionoft
raf
fi
cfr
om exi
sti
ngmodel
swhi
chwi
l
lcostupt
o80bi
l
li
on.Anew
hi
ghwaywi
l
lal
sodi
spl
acepeopl
ewhosecostofr
eset
tl
ementi
s6bi
l
li
on.I
twi
l
l
al
sol
eadt
oper
manentcl
osur
eofexi
sti
ngmot
orway
sthatwoul
dot
her
wise
r
equi
re5bi
l
li
onf
orannualmai
ntenance.Recov
erabl
eandusabl
eresour
cesf
rom
t
hecl
osedmot
orway
sandv
acat
edpr
oper
ti
esar
eval
uedat12bi
l
li
onwhi
chcan
beusedont
henew hi
ghway
.Thnew hi
ghwayi
sest
imat
edt
oyi
eldi
ntax
esof
v
ehi
clesusi
ngi
t50,
000pert
onemi
l
e.Unl
i
keexi
sti
ngmot
orway
s.Andat
otal
of5
mi
l
li
onannualt
onemi
l
esi
sexpect
ed.I
tisal
soexpect
edt
hatt
hegener
alt
ax
r
evenueswoul
dincr
easeby300mi
l
li
oneachy
earbecauseoft
henewhi
ghway
.
Ont
heot
herhand,i
tsest
imat
edt
hatt
henewhi
ghwaywoul
dcost10bi
l
li
onper
y
eart
omai
ntai
n.Ev
aluat
eeconomi
cvi
abi
l
ityoft
henew hi
ghwayr
elat
ivet
o
exi
sti
ngmot
orway
s,assumi
ngpr
ojectwi
l
lbef
inancedby10%pery
eari
nter
est
bear
ingbondswi
tht
hei
nter
estcompoundedannual
l
yatanav
erageannual
i
nfl
ati
onr
ateof4%.

Sol
uti
on;

Cost
s:

i
. Const
ruct
ioncost=700bi
l
li
on(
P)

i
i
. Tr
aff
icdi
ver
sioncost=80bi
l
li
on(
P)

i
i
i. Costofr
eset
tl
ement=6bi
l
li
on(
P)

i
v. Annual
mai
ntenancecostofnewhi
ghway=10bi
l
li
on(
A)

Benef
it
s:

i
. Rev
enues;

a)Annual
vehi
clet
axes=50,
000x5mi
l
li
on=250bi
l
li
on(
A1)

b)Gener
alt
axr
evenues(
Annuali
ncr
ementbenef
it
)=300mi
l
li
on=0.
3bi
l
li
on
(
G)
 i
i
. Recov
erabl
eandusabl
eresour
ces=12bi
l
li
on(
P)

i
i
i. For
egonemai
ntenancecostofexi
sti
ngmot
orway
s=5bi
l
li
on(
A)

Desi
gnl
i
fe,
n=20y
ear
s

I
nter
estr
ate,
i=10%

I
nfl
ati
onr
ate,
f=4%

i
-f (0.
1-0.
04)
Fr
om ef
fect
ivei
nter
estr
ate,
e= = =0.
0577
1+f (1+0.04)

Pr
esentwor
thofcost
s:

i
. Const
ruct
ioncost
,Pi=700bi
l
li
on

i
i
. Tr
aff
icdi
ver
sioncost
,Pii=80bi
l
li
on

i
i
i. Costofr
eset
tl
ement
,Piii=6bi
l
li
on

(1+e)
20
-1
i
v. Mai
ntenance cost of new hi
ghway
, Piv =A[ 20] =
e(
1+e)
( 0577)
1+0. 20
-1
10bi
l
li
on[ 20]=116.
872bi
l
li
on
0.0577( 0577)
1+0.

Ther
efor
e,pr
esentwor
thofcost
sPc=(
700+80+6+116.
872)bi
l
li
on=902.
872bi
l
li
on

Pr
esentwor
thofbenef
it
s:

i
. Reser
ves;
n
(1+e) -en- 1 1 n
Fr
om A=A1+G[ n ]=A1+G[ - n ]
e((1+e)- 1) e( 1+e)-1

1 20
Then250bi
l
li
on+0.
3bi
l
li
on[ - 20 ]=252.
302bi
l
li
on
0.0577 ( 0577)
1+0. -
1
n
(1+e)-1
Howev
er,
presentwor
thofRev
enues,
P1=A[ n]=
e(
1+e)

( 0577)
1+0. 20
-1
252.
302bi
l
li
on[ 20]=2,
948.
701bi
l
li
on
0.0577( 0577)
1+0.
 i
i
. Recov
erabl
eandusabl
eresour
ces,
P2=12bi
l
li
on

i
i
i. For
egone mai
ntenance cost of exi
sti
ng mot
orway
s, P3 = 5
( 0577)
1+0. 20
-1
bi
l
li
on[ 20]=58.
436bi
l
li
on
0.0577( 0577)
1+0.

Ther
efor
e,pr
esentwor
thofbenef
it
sPB=P1+P2+P3=(
2948.
701+12+58.
436)bi
l
li
on
=3,
019.
137bi
l
li
on

Economi
cvi
abi
l
ityofNewHi
ghway
:

Usi
ngBenef
itCostRat
ioMet
hod;

NetBenef
it
s Benef
it
s-Di
sbenef
it
s PB-0 3019. 137
= = = =3.
344bi
l
li
on
Cost Cost PC 902.
872

Si
nceBenef
it–CostRat
io>1;t
henconst
ruct
ionoft
henewhi
ghwayr
elat
ivet
othatof
exi
sti
ngmot
orway
siseconomi
cal
l
yvi
abl
e.
 2.A cont
ract
orengaged byMi
nist
ryofWor
ks on Road Const
ruct
ion Pr
oject
pr
esent
edt
hef
oll
owi
ngcer
ti
fi
edpay
ment
srequest
sforpay
mentf
orov
era
per
iodof6mont
hs;

Mont
h 1 2 3 4 5 6

Amount 200m 300m 420m 380m 350m 400m

I
fthecostoft
hewor
kdonef
oreachmont
his60%ofcer
ti
fi
edv
alueandt
hepr
esent
ed
r
equestexcl
uded5%t
obepai
datendofdef
ect
sli
abi
l
ityper
iodof3mont
hs.

How much moneydoes t

he cont
ract
orneed t
o mobi
l
ize t
o execut
ethe pr
oject
assumi
ngcer
ti
fi
edr
equest
sar
epai
dwi
thi
nonemont
hofpr
esent
ati
on;

Sol
uti
on:

Fr
om Amountdue=Val
ueofwor
kdone–5%v
alueofwor
kdone

LetVal
ueofwor
kdonebeVw

ThusAmount=Vw –5%Vw =Vw(

1-0.
05)=0.
95Vw

Howev
er,
costofwor
kdone=60%ofcer
ti
fi
edv
alue=60%ofAmount

Mont
h Amount(
mil
l
ions) Vw =(
Amount
/0.
95) Cost = 60% of
(
mil
l
ions) Amount(
mil
l
ions)

1 200 210.
53 120

2 300 315.
79 180

3 420 442.
11 252

4 380 400.
00 228

5 350 368.
42 210

6 400 421.
05 240

Tot
al 2157.
90
Ret
ent
ion:

5%of2157.
9=107.
9mi
l
li
onpai
datendofdef
ect
sLi
abi
l
ityPer
iodof3mont
hs.

Mont
h 1 2 3 4 5 6 7 8 9 10

Amount

(
mil
l
ions) 200 300 420 380 350 400

Cashi
n

(
mil
l
ions) 0 200 300 420 380 350 400 0 0 107.
9

CashI
nfl
ow

(
mil
l
ions) 0 200 500 920 1300 1650 2050 2050 2050 2157.
9

CashOut

(
mil
l
ions) 120 180 252 228 210 240 0 0 0 0

Cash
Out
fl
ow
120 300 552 780 990 1230 1230 1230 1230 1230
(
mil
l
ions)

Cashf
low

(
mil
l
ion) -
120 -
100 -
52 140 310 420 820 820 820 927.
9

Ther
efor
e,t
hecont
ract
orneedst
omobi
l
ize120mi
l
li
ont
oexecut
ethepr
oject
.