A two-lane highway between two cities, 10 miles apart, is to be converted to a four-lane divided freeway. The average daily traffic (ADT) 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 million vehicle-miles (MVM). Three alternate plans are under consideration. Plan A: Improve along the existing development by adding two lanes adjacent to the existing lanes at a cost of $450,000 per mile. This will reduce auto travel time by 2 minutes and truck travel time by 1 minute. The estimated accident rate is 2.50 per MVM. Annual maintenance is $1,250 per lane-mile. Plan B: Improve the highway along the existing alignment with grade improvements at a cost of $650,000 per mile. Plan B adds two lanes and would reduce auto and truck travel time by 3 minutes each. The accident rate of this improved road is estimated to be 2.40 per MVM. Annual maintenance is $1,000 per lane-mile. Plan C: Construct a new freeway on a new alignment at a cost of $800,000 per mile. This plan would reduce auto ravel time by 5 minutes and truck travel time by 4 minutes. Plan C is 0.3 miles longer than Plan A or Plan B. The estimated accident rate for C is 2.30 per MVM. Annual maintenance is $1,000 per lane-mile. Plan C also includes abandoning the existing highway with no salvage value.
Incremental Operating CostAutos $0.06 per mile
Trucks $0.08 per mileTime savingAutos $0.03 per minute
Trucks $0.15 per minuteAverage incident cost $1,200 per incidentIf a 5% interest rate is used, which of these three plans should be adopted?