The State of Illinois

The State of Illinois is considering a highway project that is expected to provide benefits in the form of time savings associated with speedier commute and safer driving conditions. The cost of materials for the road is expected to be $100 million. The average cost of labor for construction of the road is $30 per hour for 1,125,000 hours of total labor. The state will need to operate and maintain the road which will cost it $5 million per year. The road is expected to save 20 lives per year. On average, people are expected to accumulate $2 million in earnings over their life span. By building the road, it is expected to save 15 minutes on average per trip. It is expected that there will be 1,000,000 trips on the road per year with an average salary of $80,000 per driver based on 2,000 work hours per year. Assuming a discount rate of 5%, perform a cost benefit analysis on this proposed project over a 4 year period providing a recommendation and numerical justification for your recommendation