Question

Three alternative pavement structures A, B and C are considered for a rural road. They have the following cost characteristics per lane-mile: Alter.	DOT Construction cost $	Annual Maintenance cost $/yr	Annual Benefits $/yr	Life (yrs)
A	$250,000	$5,000	$320,000	9
B	$400,000	$6,000	$300,000	18
C	$700,000	$10,000	$380,000	25

Determine the most efficient and the most profitable alternative using the Incremental Benefit/Cost method. Given:

• there is no salvage cost and

• i=4% per year compounded yearly.

Answer 1

Benefit Cost Ratio is measured as :

(PV of Annual Benefits - PV of Annual Costs) / (Initial Cost - PV of Salvage)

Using the above methodology the BCR for the theree alternatives is as tabulated hereunder :

Conclusion:

Alternative A is the best option as the BCR is the highest.