Homework 7 . USE B/C Method
1. What is the difference between disbenefits and costs
2. Classify the following as benefits, disbenefits, or cost?
a. Less tire wear on automobiles and trucks because of smother road surface
b. Loss of income by local businesses because of rerouting of traffic to the interstate
highway
c. Decrease in property values because of closure of a national research lab
3. The first cost of grading and spreading gravel on a short rural road is expected to be
$700,00. The road will have to be maintenance at a cost of $25,000 per year. Even though
the new road is not very smooth, it allows access to an area that previously could only be
reached with off-road vehicles. This improved accessibility has led to a 200% increase in the
property values along the road. If the previous market value of the property was $400,000
calculate the
a. Conventional B/C ratio
b. Modified B/C ratio for the road using interest rate 8% per year and 20 year study period
4. A small flood control dam is expected to have an initial cost of $2,8 million and an annual
upkeep cost of $20,000. In addition, minor reconstruction will be required every 5 years at a
cost of $190,000. As a result of the dam, flood damage will be reduced by an average of
$120,000 per year. Using an interest rate of 7% per year, determine the (a) conventional B/C
ratio, b) modified B/C ratio and c) B-C value. Assume the dam will be permanent