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An Ex-Post Cost-Benefit Analysis of Bolu Mountain Tunnel Project

Author

Listed:
  • Gaye KOCABAS

    (Anadolu Group, Turkey)

  • Baris Serkan KOPURLU

    (Yaþar University, Faculty of Economics and Administrative Sciences, Department of International Trade and Finance)

Abstract

This paper analyzes the feasibility of Bolu Mountain Tunnel which is one of the most costly highway projects in Turkey. The project continued for about seventeen years and opened to use in 2007. Internal Rate of Return concept is used as a decision rule to asses the net benefit stream of the project. As the tunnel construction had not finished at the deadline planned by the earliest project appraisal, the necessity of tunnel construction became controversial among the society as it requires high investment costs which are withdrawn from other resources of the economy. The analysis is conducted for a 50 year period. According to the results, Bolu Mountain Tunnel project is not economically feasible since the Net Present Value of the project is highly negative at % 12 discount rate level. The NPV and IRR figures are recalculated under different scenarios but even in the best case the figures are negative.

Suggested Citation

  • Gaye KOCABAS & Baris Serkan KOPURLU, 2010. "An Ex-Post Cost-Benefit Analysis of Bolu Mountain Tunnel Project," Ege Academic Review, Ege University Faculty of Economics and Administrative Sciences, vol. 10(4), pages 1279-1287.
    • Handle: RePEc:ege:journl:v:10:y:2010:i:4:p:1279-1287
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    More about this item

    Keywords

    Cost–benefit analysis; internal rate of return; discount rate; net present value; Bolu Mountain Tunnel; transportation projects.;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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