Projects With a Very Long Life
Some transport investments, for example new Metro tunnels in cities, are expected to have a useful life of 100 years or more. Such a life far exceeds the standard appraisal period of 25 years. In these cases, limiting the appraisal to a 25 year period can cause some discomfort to those responsible for promoting and funding the project. Are there not benefits beyond the 25 year horizon which ought to be taken into account?
This note addresses this issue by considering: what types of project typically have a very long life? (Section 1); the choice of appraisal period (Section 2); use of residual values (Section 3); pitfalls to avoid (Section 4); and the sensitivity of these matters to the discount rate (Section 5).
World Bank, Washington D.C., USA. Transport Note No. TRN-18