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Guidelines for Preliminary Evaluation of Alternatives G-45 Exhibit 3-19. Estimating Maximum Justifiable Spending. To complete this table, three sets of calculations must be performed. In the first set, the external benefits of freight diversion in rural and urban areas are quanti- fied for the first 10 years after investment. These are calculated in terms of net present value (NPV) and summed for the 10-year period. In the second set, the first decade of benefits associated with highway investments (if known) is calculated in terms of NPV and compared to the cost of highway investments to determine the ROI of highway spending. The third set of calculations compares the benefits of freight diversion to three financial bench- marks to estimate the maximum investment that can be justified on the following grounds: (1) obtaining a positive ROI for the project, which is defined as $1 more than the break-even point: (2) matching the ROI of existing highway plans; and (3) achieving a 7-percent ROI, which is widely used as the opportunity cost for public investments. This third set of calcula- tions is the basis for the output section of Exhibit 3-19. 3.3 Further Steps for More Detailed Assessment Results of this preliminary assessment make it possible to screen situations and determine whether or not rail freight is an available and potentially feasible option to consider for highway congestion relief in that local context. The preliminary assessment furthermore makes it possi- ble to identify the specific freight market segments that may be applicable and the types of proj- ects or programs worthy of further consideration. (In the example shown earlier, analysts would consider the potential costs in Exhibit 3-19 and the given rail resources and then determine whether or not an investment of roughly $2.5 to $5.0 million in rail investments could be suffi- cient to support the level of freight diversion implied by Exhibit 3-16.) This screening is most important because rail freight options may be unrealistic or have lim- ited applicability in many situations, and the screening can save planners the time and cost of further analysis (as well as the time and cost of further public-private discussion about such options). On the other hand, the screening can serve to identify the particular situations and types of projects where rail freight can be most viable and useful in addressing congestion. For those situations, it can provide a basis for defining 1. Project options that are worth discussing further in a public-private dialogue about organi- zational and institutional feasibility (using the Chapter 4 guide to public-private dialogue that appears next), and

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G-46 Guidebook for Assessing Rail Freight Solutions to Roadway Congestion 2. Proposed project options that can be subject to more formal and detailed analysis of project costs and formal and detailed modeling of their freight modal choice impacts (using more detailed analytical methods that appear in the final chapter of this guide). The project options identified by this screening process can be any of the 15 key types of actions identified back in Chapter 1 (Exhibit 1-1) or they may be any combination of those actions.