HIGHWAY EVALUATION

ECONOMIC STUDIES FOR HIGHWAY

To determine feasibility of a object
To compare alternative locations
To evaluate various features of highway design
To determine priority of improvement
To allocate responsibility for the cost of highway improvement among the various
classes of highway users
Occasionally, to compare proposals for highway improvement with proposals for other
public projects such as education

COST OF HIGHWAY TRANSPORTATION

HIGHWAY TRANSPORTATION COST

- is defined as the sum of the highway investment cost, the maintenance and
operating cost, and the highway user costs.
THE HIGHWAY INVESTMENT COST
- is the cost of preparing a highway improvement for service including yhe cost of right-
of-way, engineering design, construction, traffic control devices, and landscaping.
MAINTENANCE COST
- is the cost of preserving a highway and its appurtenances and keeping the facility in
serviceable conditon.
OPERATING COST
- include the costs of traffic control, lightning, and the like.
TRANSIT CAPITAL COSTS
- are the investment in fixed facilities for bus transit such as terminals, shops, bus
parking facilities, and passenger benches and shelters.
TRANSIT USERS COST
- consists of te sum of bus fares paid to make a transit trip, the passenger car running
costs experienced by users in getting to a stop or terminal, and te costs of waiting and walking.
HIGHWAY USER COSTS
- highway user costs include motor vehicle operating costs, the value of travel time, and
traffic accident costs.

BENEFITS OF HIGHWAY IMPROVEMENT

1. Direct benefits that result from a reduction in highway user costs

2. Indirect benefits, including benefits to adjacent property and to the general public

PRESENT VALUE CONCEPTS

F
P = (1 + i )n
 Where:
i = interest of discount rate of period
n = number of interest periods, usually years

Problem:
In 20 years the residual or salvage value of a certain highway will be $250,000. Determine the
present value of the sum, using an interest rate of 6 percent.

The Present Worth P of a series of uniform annual end-of-period payments A can be

determined by the following equation:

Where:
SPW series present worth factor

Problem:
The user benefits for a certain highway are estimated to be a uniform $85,000 per year.
Determine the present worth of those benefits assuming an interest rate of 8 percent and an
analysis period of 25 years.

Present worth factor

Where:
i = assumed interest rate
r = rate of growth of annual value
n = analysis period
Problem:
A certain highway has user benefits of $17,500 during the first-year that uniformly
increase at a rate of 4 percent each succeeding year. Determine the present value of the
benefits, given a 12-year analysis period. Use an interest rate of 6 percent.

ECONOMIC ANALYSIS TECHNIQUES

Benefit-Cost Ratio
Net Present Value
Comparison of Annual Costs
 Determination of the Interest rate at which alternatives are Equally attractive
BENIFIT-COST RATIO
Benefit-cost ratio method, analysis was made by comparing the relations of the annual road
user costs to the annual highway costs for logical alternatives in location and design.
Formula:

Where:
PV = present value of the indicated amount or series
U = user benefits, the reductions in highway or transit user costs due to the investment
M = increase in annual maintenance, operating, and administrative cost due to the
investment
R = increase in residual value due to the project at end of project life
I = increased investment costs due to the project

NET PRESENT VALUE METHOD (NPV)

-In the net present value method, the procedure is to reduce, all benefits and costs to
their present value.
- NPV is defined as the difference between the present values of the benefits from the
project and the costs of developing the project.

Formula:

Problem:
Three alternative designs (X1, X2, X3) are being considered for a major interchange.
For each of the alternatives, the present values are shown below for user benefits, investment
costs, maintenance costs, and the residual value. By means of Eqs. 4-6 and 4-7, the B/C ratios
and NPVs are computed as indicated. What is the preferred alternative?

SOCIAL AND ENVIRONMENTAL IMPACT OF HIGHWAYS

Air quality
Noise Impact
Habitat Fragmentatiom
Water Pollution