Class Activity: Engineering Economics - Cost-Benefit Analysis
ENES 100 Fall 2024
Objective
Learn to perform a cost-benefit analysis (CBA) for an engineering project, understand how
to evaluate financial viability, and make informed decisions.
Project Title: Construction of a New Bridge
Project Description:
A new bridge is proposed to connect two towns, reducing travel time and improving
transportation eEiciency. The project aims to enhance local economic activity by
facilitating better access to markets.
Data for Cost-Benefit Analysis
1. Initial Costs:
• Construction Costs: $2,500,000
• Land Acquisition: $500,000
• Environmental Impact Assessment: $100,000
• Total Initial Costs: $3,100,000
2. Annual Operating Costs:
• Maintenance: $50,000
• Insurance: $20,000
• Total Annual Operating Costs: $70,000
3. Benefits:
• Reduced Travel Time Savings: $200,000 per year (based on reduced fuel
costs and time savings for commuters)
• Economic Growth: $150,000 per year (increased business activity)
• Total Annual Benefits: $350,000
4. Project Lifespan: 20 years
5. Discount Rate: 5%
Activity Outline
1. Introduction: Write a paragraph with the following information
• Explain the importance of engineering economics and cost-benefit analysis
in project decision-making.
• How will engineering economics help you determine if building the bridge is a
good decision?
2. Cost-Benefit Analysis Calculation
• Perform the following calculations using Excel:
• Net Present Value (NPV) of benefits and costs.
• Tot a l C os ts over the lifespan of the project.
• Total Benefits over the lifespan of the project.
