Selection of interest and inflation rates for infrastructure investment analyses.

Details

• Creators:
  Qin, Xiao ; Wang, Kai ; Wang, Zhiguang
• Corporate Creators:
  South Dakota State University. Department of Civil and Environmental Engineering
• Corporate Contributors:
  United States. Department of Transportation. Research and Innovative Technology Administration
• Subject/TRT Terms:
  Decision Making Economic Analysis Inflation Infrastructure Interest Rates Investments Life Cycle Costing
• Publication/ Report Number:
  MPC 14-275
• Resource Type:
  Tech Report
• Geographical Coverage:
  South Dakota
• Corporate Publisher:
  Mountain-Plains Consortium
• Abstract:
  The South Dakota Department of Transportation (SDDOT) uses engineering economic analyses (EEA) to
  
  support planning, design, and construction decision-making such as project programming and planning,
  
  pavement type selection, and the occasional valuing of roads transferred from the state highway system to
  
  counties and cities. Interest, inflation, and discount rates are three critical factors that significantly affect
  
  the outcome of an economic analysis.
  
  The selection and use of appropriate interest and inflation rates for various SDDOT applications are of
  
  primary concern. The inflation rate currently used by SDDOT is calculated from the South Dakota
  
  Construction Composite Index (SDCCI). This general rate can neither differentiate between regional
  
  changes to highway construction costs nor show variation among the individual material inflation rates
  
  used to create the CCI. In addition, SDDOT generally assumes a zero interest rate which approximately
  
  equates the real discount rate to the inflation rate. The validity of this assumption needs to be verified.
  
  Establishing and maintaining sound and equitable rates of interest, inflation, and discount is extremely
  
  important to SDDOT. Using inappropriate values for interest and inflation rates could unfairly favor
  
  certain industries and regions, jeopardize economic analyses, and weaken the credibility of SDDOT
  
  investment decisions. This study is intended to determine whether appropriate rates are being used in
  
  various applications and to establish a means of obtaining appropriate rates that can help validate,
  
  support, and enhance SDDOT’s transportation investment decisions.
  
  
• Format:
  PDF
• Collection(s):
  University Transportation Centers US Transportation Collection
• Main Document Checksum:
  urn:sha-512:943c30b66f4abe779d74767ffa493c5099ee776a28ce0740703056badcb677737869af093fadf4d9b114f8b0ee0aec01b2b1a26995ae3c1a67cb746d967a6bef
• Download URL:
  https://rosap.ntl.bts.gov/view/dot/28528/dot_28528_DS1.pdf
• File Type:
  [PDF - 1.53 MB ]