ABSTRACT
This chapter describes general theory of economic evaluation. The supply and demand curve concepts can be enlarged to take into account the consequences both of changes in demand and proposals for possible alternative highway improvements. The former set of costs, known as capital costs, generally are the most extensive, yet maintenance costs also can be significant. The discounted benefits from a proposed transportation facility then should exceed the discounted costs in order for it to be a worthwhile investment. The first formal method of comparison is the payback period. It is the length of time from the beginning of the project before the net benefits return the cost of the capital investment. The net present value technique attempts to overcome many of the difficulties in the preceding two approaches by employing the discount factor to show the value of a cost or benefit now versus at some time in the future.
