The City of Angels is considering two transportation projects to address its traffic congestion. The first one is a light-rail system while the second one is a new highway. Some economic data on both are presented below:
In addition, the expected benefits from reduction in air pollution are $20 million per year in the case of the light-rail system and $21 million per year in the case of the highway. Service lives of the two alternatives are 50 years. Assuming a 10% MARR as suggested by the Canadian Treasury Board for public projects, which project is preferred? Does your conclusion change under 5% and 15% MARR?

Question

The City of Angels is considering two transportation projects to address its traffic congestion. The first one is a light-rail system while the second one is a new highway. Some economic data on both are presented below:
  In addition, the expected benefits from reduction in air pollution are $20 million per year in the case of the light-rail system and $21 million per year in the case of the highway. Service lives of the two alternatives are 50 years. Assuming a 10% MARR as suggested by the Canadian Treasury Board for public projects, which project is preferred? Does your conclusion change under 5% and 15% MARR?

Quizplus · Accepted Answer

The Answer of The City of Angels is considering two transportation projects to address its traffic congestion. The first one is a light-rail system while the second one is a new highway. Some economic data on both are presented below:
  In addition, the expected benefits from reduction in air pollution are $20 million per year in the case of the light-rail system and $21 million per year in the case of the highway. Service lives of the two alternatives are 50 years. Assuming a 10% MARR as suggested by the Canadian Treasury Board for public projects, which project is preferred? Does your conclusion change under 5% and 15% MARR?

The City of Angels Is Considering Two Transportation Projects to Address