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Transportation Engineering (Cve 503) : Engr. Stephen Agyeman Department of Civil Engineering
Transportation Engineering (Cve 503) : Engr. Stephen Agyeman Department of Civil Engineering
OUTLINE
INTRODUCTION
INTRODUCTION CONTD
The process enables highway planners to decide:
Whether
Also
6.Selection
environmental assessment.
Thus,
Benet/cost
Internal
First
Payback
Cost
ratio (B/C).
Period (PBP).
ECONOMIC DECISION
However,
in which case, the decision is made on the basis of whether the project is
economically efcient or not.
in agricultural output.
Changes
in services.
Changes
in industrial output.
Changes
in consumers behavior.
Changes
in land values.
Changes
in income.
13
Beneciaries are the road users and the losers are those
funding the scheme.
CBA utilises the NPV technique where the costs and benets of the scheme
are discounted over time (20yrs) so that they represent present day values.
Where competing project options are being compared, assuming they are
being used in identical capacities over the same period,
but a set of
maintenance costs,
level
geometric
together
motorists,
design,
The primary grouping that contains this type of economic gain is termed
user benets.
Reduction
2.The
The costs and benets occur at different times over this time horizon.
This is achieved using discount rate, which translates all costs and
benets to time equivalent values.
The actual value used is the social discount rate, given that the
decision-maker is interested in the benets and costs to society as a
whole not to any individual or group of individuals.
The NPV will estimate the economic worth of the project in terms of
the present worth of the total net benets.
The IRR will give, for each option under consideration, the rate at
which the NPV = 0
B/C ratio based on the ratio of the present value of the benets to
the present value of the costs.
For IRR and B/C ratio, if the options under consideration are mutually
exclusive, an incremental analysis must be carried out to establish
the best performing one in economic terms.
the
the
For independent project where choosing one does not exclude the
possibility of proceeding with one or all of the others where all
techniques yield the same result, the determinant should be choice of
discount rate.
The one with the highest B/C score is given the rank 1, the 2nd
highest score is given the rank 2, and so on.
developer is faced with a choice b/n two development alternatives for a toll
bridge project: one large-scale proposal with higher costs but enabling more
trafc to access it, and the other less costly but with a smaller trafc capacity.
Details
Calculate
the payback period and check this result against the NPV for each.
Project Details
Option A
Option B
27
50
10
Life (years)
20
20
SOLUTION 1.1
Solution 1.1
SOLUTION- NPV
Decision:
On
primary
The project with the higher EAV is preferred to the project with
the lower EAV.
NPV0
EAV
A n, k
SOLUTIONPROJECT A
NPV C PVIFA 4, 0.10 C0
PV of costs
Equivalent annual cash flow
PVIFA 4, 0.10
$6 170
3.1699
$1 946
SOLUTIONPROJECT B
NPV C PVIFA 8, 0.10 C 0
$1 200 5.3349 $6000
$6402 $6000
$12 402
PV of costs
Equalivant annual cash flow
PVIFA 8, 0.10
$12 402
5.3349
$2325
SolutionInterpretation
Project A is better because it costs $1946 per year
compared to Project Bs $2325 per year.
Year 1
Year 2
Year 3
Year 4
Initial cash
outlay
-70 000
9250
24100
29122
40000
-60 000
40000
20420
10520
5000
B
-60000
40000
20420
10520
5000
15940
2659
i
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
NPVA
32472
26629
21258
16310
11746
7527
3620
-2
-3367
-6497
-9412
NPVB
15940
13375
10967
8703
6570
4559
2659
861
-841
-2455
-3987
Solution 1.2
Project
NPV
Rank
IRR
Rank
$3620
14%
$2659
15%
IRR3
NPV/C
FYRR
V.Good V.Good
V.Good
Poor
V.Good
Poor
Good
Poor
Project timing
Fair
Poor
Poor
Good
Poor
V.Good
Good
Poor
Fair
Poor
V.Good
Poor
Project screening
Notes:
1.Check for robustness to changes in key variables (sensitivity analysis)
2.
3.
Any
Alternative
Short-run
2.A
Air quality.
2.
Cultural heritage.
3.
8.
Construction disturbance.
9.
Vehicle travellers.
4.
Ecology/nature conservation.
10.
5.
Landscape effects.
11.
6.
Land use.
12.
7.
At the early stages of the highway planning process, the EIT format
can be used to consider alternative route corridors.
TRAFFIC CATEGORIES
DEVELOPMENT BENEFITS
No Rate of Return
100
Alternative B
Benefits
80
60
40
20
Alternative A
0
0
20
40
60
Costs
80
100
120
6
5
Alternative A
4
3
2
1
0
0
20
40
60
Costs
80
100
120
COMPARISON OF ALTERNATIVES
Projec
t
Alternatives NPV
0.0
3.7
6.7
5.5
Optimal
Alternative:
Highest NPV
RANKING PROJECTS
When comparing the economic priority of different projects, a
recommended economic indicator is the NPV per Investment ratio
Project
s
Selected
Alternative
NPV/Investment
Overlay
8.4
Reseal
5.2
Overlay
2.1
P
R
I
O
R
I
T
Y
NPV
Selected
Alternative
Overlay
Reseal
16.8
15.6
20.0
3.0
5.0
Investment
NPV per
Investment
2.0
8.4
3.0
5.2
5.0
4.0
1.5 Off
Budget2.0
Constraint Cut
P
R
I
O
R
I
T
Y
NPV
0.0
3.7
6.7
5.5
0.0
2.0
1.0
3.5
Available Budget
0.0
5.4
2.1
3.2
The
Hence
71
SENSITIVITY ANALYSIS
Consequences
of changes on inputs
Investment
Investments
Costs
Normal Traffic
Traffic Growth Rate
Generate Traffic
Investment
Cost
Road User Benefits
RISK ANALYSIS
74
Tracks
Roads
Highways
Rural Transport
Infrastructure
Focus on social evaluation (cost effectiveness indices, community
priorities and multi-criteria analysis)
of improvement/population.
estimated
trips/cost.
Timing etc.;
COMMUNITY PRIORITIES
b.
Project
Alternatives Investment
2.0
Optimal Alternative:
3.7
Lower Investment
1.7
5.5
50
150
500
Effectiveness
Indicator
Threshold
Example
Eligible
Not Eligible
Effectiveness
Indicator Threshold
Evaluate Universe of
Projects and Available
Budget
88
Etc.
Etc.
TOTAL BENEFICIARY
POPULATION (2)
For example, for the road section B-C:
Directly Benefited Population = Population along section B-C plus on towns B & C
Indirectly Benefited Population = Population along section A-B plus on town A
Population
Beneficiary
Population
per km
Factor
9,889
520
1,237
564
344
503
Agricultural Area
Poverty
Poverty
Percent
1.00
0.05
0.13
0.06
0.03
0.05
99%
99%
99%
97%
97%
97%
Percent
of Area of
Influence
Factor
1.00
1.00
1.00
0.98
0.98
0.98
0%
0%
0%
14%
36%
18%
Priority Index
Functional
Location on Basic
Classification
Network
Traffic
Daily
Traffic
(AADT)
Factor
0.25
0.64
0.32
20
20
15
80
15
35
A=4 B=3
C=2 D=1
Factor
0.25
0.25
0.19
1.00
0.19
0.44
1
2
2
3
3
3
Yes = 1
No = 0
Factor
0.33
0.67
0.67
1.00
1.00
1.00
1
1
1
1
1
1
1.00
1.00
1.00
1.00
1.00
1.00
Priority Index
Health Centers
Factor = Value /
Maximum Value
Yes = 1
No = 0
0
0
0
0
0
0
Factor
Public Transport
Schools
Yes = 1
No = 0
0
0
0
1
1
1
Factor
1.00
1.00
1.00
Yes = 1
No = 0
1
1
1
1
1
1
Factor
1.00
1.00
1.00
1.00
1.00
1.00
Environment
Feasibility
Yes = 1
No = 0
1
1
1
1
1
1
Factor
1.00
1.00
1.00
1.00
1.00
1.00
Factor
Priority
Index
5.6
5.0
5.0
7.3
6.8
6.8
Hea
The End