need help with this financial management question!!!!

Florida International University Extra Credit Assignment BCN3753- Financial Management of Construction Organization Spring 2017

Extra Credit Assignment Page 2 of 5

access to state roads, and provide an improved freight corridor for the region. The new route will

provide for more direct access to US 231 and in turn provide improved access to Interstate-10, as well

as providing greater accessibility to the coastal communities in Gulf County. Currently, US 98 crosses

through Tyndall Air Force Base. The proposed new roadway will bypass the air force base which will

allow for heightened security on the base and provide an alternate route if passage through the base is

temporarily blocked or restricted. Additionally, the new route will provide an alternative hurricane

evacuation route for area residents.

Florida International University Extra Credit Assignment BCN3753- Financial Management of Construction Organization Spring 2017

Extra Credit Assignment Page 3 of 5

Figure 2 - Five Selected Alternative Alignments

After a long time of study on the proposed new roadway, five alternative alignments (see Figure 2)

were selected and approved by the Florida Department of Transportation (FDOT) for further

evaluation. The length and estimated construction cost of the five selected alignments can be found

in Table 1.

Table 1 – Length and Estimated Construction Cost

Alignments Length (miles) Estimated Construction Cost (Millions) 8 38 $424.69

14 44 $460.68 15 48 $517.12 17 33 $430.32 19 38 $454.43

The proposed new roadway will enhance the economic development in Gulf County through

providing direct access to major transportation facilities, direct access to tourist destination in south

Gulf County, and improving Hurricane evacuation for residents of coastal Gulf County. The direct

transportation benefits of each selected alignment is summarized in Table 2.

Table 2 – Summary of Direct Transportation Benefits

Alignments

Commuting Time

Savings to Panama City

(Minutes)

Travel Time Savings to Airports

(Minutes)

Travel Time Savings to Transfer Facilities (Minutes)

Travel Time Savings for Tourists to

Coastal Gulf County

(Minutes)

Improvements Through

Enterprise Zones (Acres)

Shortened Hurricane

Evacuation Distance (Miles)

8 1.6 8 7.7 10.2 62.6 3.79 14 1.6 6.4 14.9 19.8 62.6 8.15 15 1.6 3.6 9.9 13.2 68.6 12.45 17 3.7 9.6 13.1 19.8 47 5.27 19 3.7 7.2 15.8 19.8 47 8.15

For transportation benefits: (1) the value of time savings can be estimated based on the local wage

rates and the trip purpose. The value of time savings for commuting travels is equal to 50% of the

gross wage, and the value of time savings for other travels is equal to 25% of the gross wage. The

estimated daily traffic of different trips at year 2020, 2030, and 2040 can be found in Table 3, and the

local gross wages at year 2020, 2030, and 2040 are forecasted to be $14/hr, $17/hr, $21/hr

respectively; (2) one acre of improvements through enterprise zones will bring $0.4 million benefits

Florida International University Extra Credit Assignment BCN3753- Financial Management of Construction Organization Spring 2017

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to the local economy annually; and (3) one mile of shortened hurricane evacuation distance will

reduce the evaluation cost by $1 million when a hurricane hits the region.

Table 3 – Estimated Future Daily Traffic of Different Trips

Despite the benefits it will bring, the proposed Gulf Coast Parkway will also have significant social

and environmental impacts. A summary of the social and environmental impact can be found in

Table 4.

Table 4 – Summary of Social and Environmental Impact

Prior to the construction, all properties within the proposed corridor should be purchased and

relocated, and all the affected historic or archeological sites, wetlands, and endangered or threatened

species sites should be relocated or mitigated. To facilitate your estimation of social and

environmental cost, the average cost to purchase and relocate the properties can be found in Table 5,

and the average cost to relocate or mitigate the resources can be found in Table 6.

Table 5 - Average Cost to Purchase and Relocate the Properties Residential Parcels Business Parcels Agricultural Parcels Average Purchasing and

Relocation Price (Millions)

0.4/parcel 0.8/parcel 0.2/parcel

Table 6 – Average Cost to Relocate/Mitigate Resources

Archaeological or Historic Sites Wetlands

Threatened and Endangered Species

Sites Average Relocation /

Mitigation Cost (Millions)

0.4/site 0.1/acre 0.2/site

Year 2020 2030 2040 Estimated Daily Traffic to Panama City 18,200 22,100 26,900

Estimated Daily Traffic to Airport 10,300 12,500 15,200 Estimated Daily Traffic to Transfer Facilities 10,000 12,200 14,800

Estimated Daily Tourists Traffic to Coastal Gulf County 6,200 6,900 8,800

Alignments

Property Type Within the Corridor Archaeological or

Historic Sites Wetlands (Acres)

Threatened and

Endangered Species Sites

Residential Parcels

Business Parcels

Agricultural Parcels

8 48 9 108 9 339 17 14 49 3 79 12 504 16 15 50 3 75 9 508 17 17 63 8 68 4 439 26 19 48 6 95 6 575 25

Florida International University Extra Credit Assignment BCN3753- Financial Management of Construction Organization Spring 2017

Extra Credit Assignment Page 5 of 5

For any alignment selected, the construction will begin at 2017, and will take 3 years to complete.

The useful life of the proposed Gulf Coast Parkway is 20 years. Table 7 shows the maintenance and

operation costs of the proposed parkway within 20 years of useful life.

Table 7 – Maintenance and Operation Costs of the Proposed Parkway FDOT invited you to evaluate the five selected alternative alignments using benefit-cost analysis,

and determine which one of the alignments, if any, should be constructed. Based on the above given

information, you need to prepare an evaluation report including the analysis you conducted, which

alignment you would choose and any necessary assumptions you made for your analysis.

Additional Tips:

x In this problem, the interest rate is not given so you need to set the interest rate on your own.

Different interest rates used may lead to completely different conclusion for this problem, so

you need to explain briefly why the interest rate is chosen.

x To estimate the benefits of the proposed parkway on travel time savings, the annual benefit =

estimated daily traffic * 365 * time savings * gross wage * trip-purpose modifier, for

commuting trips, the modifier is 0.5, and for other trips, the modifier is 0.25. (Pay attention:

the gross wage given is an hourly rate, but the unit of time savings is minute).

x In table 4, only the estimated daily traffics at year 2020, 2030, and 2040 are given. To find

out the estimated daily traffic of another year, you can assume the daily traffic is changing at

the same speed from year 2020 to 2030, and from year 2030 to 2040. Similarly, you can find

out the gross wage at another year.

x The $1million/mile benefit of shortened hurricane evacuation distance only happens when a

hurricane hits the region. You need to assume the frequency of the hurricane first, e.g. once a

year.

Annual Operating Costs (per mile) $10,500

Preservation cost at Year 10 (per mile) $50,000

Rehabilitation cost at Year 20 (per mile) $600,000