Answer:
$320,000
Explanation:
Since the Highway engineers want to reduce the risk of someone dying in an accident from 5.3 percent to 2.1 percent over the life of the highway, and a human life is worth $10 million, then the project is worth doing as long as it does not cost more than:
5.3% of $10,000,000 = $530,000
2.1% of $10,000,000 = $210,000
Therefore the cost of the project should be the value it wants to add and no more for it to be feasible which is $530,000 - $210,000 = $320,000
Answer:
Not more than $320,000
Explanation:
Using cost benefit analysis, the benefit of undertaking a project must be greater than the cost incurred. It is a way of analysing different plans of action and choosing the one that gives greater benefit ate least cost.
The highway engineers want to improves a dangerous stretch of road reducing risk to lives from 5.3 to 2.1 percent.
Risk before project= 0.053* $10,000,000
Risk before project= $530,000
Risk after the project= 0.021* 10,000,000
Risk after the project= $210,000
Therefore benefit of the road= 530,000-210,000= $320,000
It will reduce risk to human lives by $320,000. So the project cost must not be more than $320,000.
