Assignment:
In this assignment, we will continue our analysis of Pierce Transit's potential investment in bus rapid transit (BRT) along the Pacific Avenue corridor.
This assignment covers Steps 4-5 of the cost-benefit analysis framework, and builds on Assignment, which covered Steps 1 to 3. The content of this assignment will be used in the final report.
Before beginning the analysis: Refer to the Answer Key to Assignment 1 for guidance regarding the assumptions that we will make for Steps 1 to 3 of the analysis.
In this assignment, we will complete the following two steps (combined):
Step 4: Predict the impacts quantitatively over the life of the project.
Step 5: Monetize (attach dollar values to) all impacts.
Generally, we would estimate the quantitative impacts of the costs and benefits that you previously identified in Step 3. For this class, we will focus on the impacts outlined below (for the analysis, you can exclude any impacts that are not mentioned below).
In Assignment 3, we will use the results from Steps 4-5 to develop a spreadsheet that includes the information from Assignment 2. For this assignment, you may develop the spreadsheet with your results and submit the file, or you can submit your work for the calculations of the impacts below, and wait to develop the spreadsheet in Assignment.
You have been provided with the following information regarding potential impacts of the BRT project:
• It is currently January 1, 2019 and Pierce Transit is deciding whether nor not to approve the BRT project.
• If approved, construction of the project would begin in January 2020 and take 4 years to complete.
• The project would become operational at this time (i.e. in January 2024).
• Your analysis should extend to the first 20 years of operations.
• All monetary values are in real terms (i.e. adjusted for inflation).
• Assume that all of the costs or benefits are accrued at the beginning of the year specified (for example, costs in 2020 would occur one year from the present time).
• In 2016, Pierce Transit carried out a feasibility study that cost $750,000.
• Pierce Transit has signed a contract with you to pay you $200,000 in 2019 to conduct the costbenefit analysis and has signed another contract with a local consultant to pay them $300,000 in 2019 to conduct an Environmental Impact Assessment of the project.
• Annual construction costs would be as follows:
o 2020:
Materials = $20,000,000
Labor = 500,000 hours; all workers earning the minimum wage of $15/hour
o 2021:
Materials = $100,000,000
Labor = 750,000 hours; all workers earning the minimum wage of $16/hour
o 2022:
Materials = $125,000,000
Labor = 1,000,000 hours; all workers earning the minimum wage of $16/hour
o 2023:
Materials = $50,000,000
Labor = 1,250,000 hours; all workers earning the minimum wage of $16/hour
• The BRT line is 14.4 miles long and would require 0.75 acres of land on both sides of the line to be used for the transit service. Prior to the announcement of the project, the market value of this land was valued at $10,000,000 per acre.
• Maintenance costs are expected to be $750,000 per year, beginning in 2025. These costs are forecasted to increase by 1% each year.
• Fares are set at $2 per trip for all transit trips (with or without the BRT project). Average operating costs are $5 per trip, and any financial operating loss is to be covered via taxpayer subsidy.
• The monetary value of time for a transit trip is $4 per trip once the BRT is operational; without the BRT, the monetary value of time for a transit trip is $9 per trip.
• Let QT = the number of trips by transit (measured in millions) and QA = the number of trips by automobile (measured in millions), and P is measured in $.
• The annual demand curve for transit trips (which applies whether or not the BRT project is undertaken) is given by the following equations:
P = 20 - 4QT, for years 2024 - 2033
P = 22 - 3QT, for years 2034 - 2043
• We assume that there are no externalities from transit travel.
• The annual demand curve for automobile trips if there is no BRT project is given by the following equations:
P = 200 - 2QA, for years 2024 - 2033
P = 250 - 3QA, for years 2034 - 2043
The marginal private cost of automobile travel is MPC = 3QA, and this captures the monetary and non-monetary costs of automobile travel. The marginal external cost of automobile travel is MEC = QA.
• The annual demand curve for automobile trips if the BRT project is constructed is given by the following equations:
P = 175 - 2QA, for years 2024 - 2033
P = 190 - 3QA, for years 2034 - 2043
The same marginal private and external costs would apply.
• Engineers have designed the transit system to be extremely safe and it is forecasted that there will be zero fatalities due to transit travel, with or without the BRT system.
• The fatality rate for automobile travel is 1 death for every 4 million trips. The value of a statistical life is $6 million.
Attachment:- Pierce Transits Investment in BRT.rar