When red light cameras are installed at high-risk intersections, rear-end collisions go up, but all other types of accidents go down, including those involving pedestrians. Analysis of traffic accidents in a northwestern city revealed that the total number of collisions at a group of selected photo-enhanced intersections decreased from 33 per month to 18. At the same time, the number of traffic tickets issued for red light violations averaged 1100 per month, at a cost to violators of $85 per citation. The cost for the contractor to install the basic camera system at the selected intersections was $750,000. For analysis purposes, use an interest rate of 0.5% per month and a 3-year study period. The cost of a collision is estimated at $41,000 and traffic ticket costs are considered as disbenefits. (a) Calculate the B/C ratio for the camera system from the perspective of the city. (b) The contractor has proposed to operate and maintain the system, plus provide collected violation data to the police department each 24-hour period for a fee of 50% of the estimated cost of a collision. Calculate the profitability index (PI) from the perspective of the contractor.
When red light cameras are installed at high-risk
intersections, rear-end collisions go up, but all
other types of accidents go down, including those
involving pedestrians. Analysis of traffic accidents
in a northwestern city revealed that the total number
of collisions at a group of selected photo-enhanced
intersections decreased from 33 per month
to 18. At the same time, the number of traffic tickets
issued for red light violations averaged 1100
per month, at a cost to violators of $85 per citation.
The cost for the contractor to install the basic
camera system at the selected intersections was
$750,000. For analysis purposes, use an interest
rate of 0.5% per month and a 3-year study period.
The cost of a collision is estimated at $41,000 and
traffic ticket costs are considered as disbenefits.
(a) Calculate the B/C ratio for the camera system
from the perspective of the city.
(b) The contractor has proposed to operate and
maintain the system, plus provide collected
violation data to the police department each
24-hour period for a fee of 50% of the estimated
cost of a collision. Calculate the profitability
index (PI) from the perspective of
the contractor.
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