Toll lanes on a section of the 1-40 freeway are being considered in order to reduce traffic congestion and travel times.
Since this is a government project, the B-C ratio method must be applied in the evaluation. The following are cost and other estimates:
Construction costs = $18,900,000
Operating and maintenance costs = $610,000 per year
Projected service life = 20 years
Savings in travel times and revenues generated from the tolls = $3,108,000 in the first year of operation and projected to increase by 2.2% per year due to the projected annual increase in traffic. In addition, environmental analysis estimates that the project will result in increased noise and air pollution that will cause an additional societal health cost of $740,000 the first year and is also projected to increase at 2.2% per year.
Assuming zero market (salvage) value at the end of 20 years and a MARR of 9% per year, should the toll lanes be constructed?
The conventional benefit-cost ratio of the project with PW is $\boxed{}$ (Round to two decimal places.)
According to the B-C ratio method, the toll lanes should
A. not be constructed
B. be constructed
