In this example, we will evaluate the bypass described in the beginning of the
chapter. The construction cost of the bypass is $20 million, and $500,000 would
be required each year for annual maintenance. The annual benefits to the public
have been estimated to be $2 million. If the study period is 50 years and the
state’s interest rate is 8% per year, should the bypass be constructed? What
impact does a social interest rate of 4% per year have on the B–C ratio of the
project?