Case Study on the California High Speed Rail System Essay

2000 Words Mar 5th, 2012 8 Pages
A Case Study on the California High Speed Rail System (CAHSR) - Is It Feasible?


Hardeep Ramesh, MS ISE

Engineering Economics (ISE 460)

University of Southern California

December 3, 2010


California High Speed Rail (CHSR) system is a mega project planned by the California High Speed Rail Authority (CA HSRA), connecting the major metropolitan areas of California. The project finalized in mid 2000, is estimated to be one of the most expensive of its kind. It is in the lines of the high speed rail systems existing in France, Japan and China. The cost of the total project, which will cover around 800 miles, is estimated to be around $45 billion as of 2008. At this time of economic instability and no proper
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The real IRR for the high-speed train project is 8.8 percent, indicating that the project remains economically feasible even at real discount rates well above four percent.

The determination of the benefits from various sources is as shown: 1. Intercity passenger revenue: In a publicly financed project, passenger revenue reduces the costs that must be funded from other sources. However, in a benefit cost analysis, passenger revenues are counted as a benefit. The present value of the intercity passenger revenue totals over $34.5 billion. 2. Benefits to high-speed train passengers: Most intercity high-speed train passengers will value the benefits from traveling on these high-speed, comfortable, and safe trains more than the fares they paid to ride the system. This value, measured as the difference between the fares paid by passengers and the amount they would be willing to pay, is also known as consumer surplus. The consumer surplus for intercity high-speed train passengers has a present value of $56 billion, or about $78 per intercity passenger in the year 2030. Notably, the consumer surplus is about 60 percent larger than passenger fare revenue. This result reflects a fare policy assumed by the Authority that maximizes public benefits while maintaining a healthy operating surplus. In urban areas,

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