Project Feasibility Analysis Transportation Planning Asian Institute of Technology

Contents Components in Feasibility Analysis Transportation Feasibility Analysis Transportation Demand Analysis by Elasticity Economic Feasibility Study

Components in Feasibility Analysis Considerations for Feasibility Analysis Engineering Feasibility Construction techniques Construction plan and stages Economic and Financial Feasibility Traffic forecast Economic and financial evaluation Environmental Feasibility Environmental impact Community impact

Components in Feasibility Analysis Type of Traffic Demand Existing Traffic Normal Growth Traffic Divert Traffic Shift or Transferred Traffic Generated or Induced Traffic Developement Traffic

Transportation Demand Analysis by Demand Elasticity Demand Elasticity with respect to a particular factor is the rate of change of travel demand compared with that factor Alternative simplified demand analysis method Unitless. Sensitivity to a factor is easy to understand. It is, however, difficult to determine in practice.

Transportation Demand Analysis by Demand Elasticity Assume that demand function is linear with the influential factor in the analysis range Arc elasticity of demand Demand at x2 D0 D1 X0 X1 Variable ประยุกต์ใช้ทฤษฎี arc elasticity

Transportation Demand Analysis by Demand Elasticity If demand function is not linear with the influential factor, we assume constant elasticity in the analysis range. Arc elasticity of demand Demand at x2 D0 D1 X0 X1 Variable

Transportation Demand Analysis by Demand Elasticity Example A study on a mass transit line showed that the off-peak demand inversely varied with the headway as shown in the table. Find demand elasticity with respect to headway If current headway is 10 minutes and the planner wants to extend it to 12 minutes, determine number of passengers per hour. Headway (minutes) Ridership (Pax/hr) 7 10,000 10 8,500

Transportation Demand Analysis by Demand Elasticity Linear relationship Demand Elasticity at Headway = 10 minutes If headway increases to 12 minute: passengers per hour 10000 8500 D=? 7 10 12 Headway

Transportation Demand Analysis by Demand Elasticity Power relationship Demand Elasticity at Headway = 10 minutes If headway increases to 12 minute: passengers per hour 10000 8500 D=? 7 10 12 Headway

Transportation Demand Analysis by Demand Elasticity Conclusions highly elastic variables include those that when change a little would result in significant change of demand. A factor of which absolute elasticity value is higher than 1 is considered highly elastic Advantage Used in case of low budget, time and information Disadvantages Assume all other variables are constant during analysis period. Suitable for short term evaluation. Long term elasticity is not constant.

Economic Feasibility Analysis Economic Analysis Comparisons between positive and negative impact. Assess benefits and loss to all population in the area. Positive and negative feedback should be tangible and convertible to numbers. Exclude all monetary revenue.

Economic Feasibility Analysis Economic Costs Economic costs consists of true value of resource used in producing products and services. It will exclude taxes and excess profits charged by contractors or service providers Item Value Financial Cost (1) 100 Less 7% value added tax (2) = (1)/1.07 93.46 Profit tax (30% of profits which is 15% of total value) (3)=(2)x0.30x0.15 4.21 Economic costs (4)=(2)-(3) 89.25

Economic Benefits from Transport Project Direct Benefits Timesaving Vehicle Operating Cost Saving Accident Saving Consumer Surplus Indirect Benefits Life Quality Economic Growth Environmental preservation Consumer Surplus is the difference between the willingness to pay and the actual cost paid by the user.

Economic Benefits from Transport Project Cost D-D shows travel demand which is varied with travel expenses. When C1 is reduced to C2 demand is up from Q1 to Q2 A part of this benefit was contributed to current and future travelers. Total Benefits D C1 1 2 C2 D Q1 Q2 Trips

Glossary Interest Rate Ratio between interest and principle after a period of time expressed in percentage, usually calculated in a year or less. Simple Interest Compound Interest Discount Rate The annual interest divided by the capital including that interest Minimum Acceptable Rate of Return (MARR) The minimum rate of return on a project a manager or company is willing to accept before starting a project, given its risk and the opportunity cost of forgoing other projects

Economic Feasibility Study Index Net Present Value - NPV Benefit-Cost Ratio - BCR Internal Rate of Return - IRR C0 C1 C2 Cn-2 Cn-1 Cn B1 B2 Bn-2 Bn-1 Bn

Net Present Value - NPV Convert all benefits and costs throughout the project period into present value using proper discount rate. Find difference between present values of benefits and costs. NPV > 0 shows economic feasibility. The higher the NPV, the more attractive the project.

Net Present Value - NPV C0 B1 C1 C2 B2 Cn-2 Bn-1 Cn-1 Cn Bn Bn-2 where Bk = Benefits in Year k Ck = Costs in Year k n = Years in analysis i = Discounted rate

Benefit-Cost Ratio - BCR Convert all benefits and costs throughout the project period into present value using proper discount rate. Find the ratio between present values of benefits and costs BCR > 1 shows economic feasibility. The higher the BCR, the more attractive the project.

Benefit-Cost Ratio - BCR Cn-2 Bn-1 Cn-1 Cn Bn Bn-2 where Bk = Benefits in Year k Ck = Costs in Year k n = Years in analysis i = Discounted rate

Internal Rate of Return - IRR An economic feasibility analysis by determining a discount rate which makes net present value equal zero. Internal Rate of Return, r

Economic Feasibility Analysis Example An overpass project capital costs is estimated 9 million baht with additional maintenance costs. It is expected to save time, vehicle operating and accident costs as shown. Providing 20 years project period and use 12% discount, evaluate if this project is feasible using NPV, BCR and IRR.