Investment Valuation of an Underground Freight Transportation (UFT) System in Texas

Construction of new intermodal transportation systems, such as Underground Freight Transportation (UFT) systems by using underground pipelines or tunnels for moving goods can mitigate highway congestion and also add capacity to the existing freight movement network. Planning for implementation of such large and innovative infrastructure projects, requires a rigorous investment valuation to explicitly show the advantages of the project for the public and private parties. The objective of this research is to assess investment opportunities of a container-size UFT system to transport freights for a proposed route (the Port of Houston to the City of Dallas). The cash inflows and outflows of the UFT system are developed for a 100-year life cycle of the system. The initial costs, such as cost of tunneling, cost of terminal land and development, and cost of the Linear Induction Motors (LIM) are considered as one-time costs. Other costs and benefits are assumed as recurring annual costs in the life cycle of the UFT system. The present values of the benefits and costs of the UFT are calculated. The Net Present Value (NPV) and benefit-cost (B/C) ratio of the UFT system are obtained based on the present values of benefits and costs. The system internal rate of return is presented and compared to the market interest rate. The NPV, B/C ratio, and IRR of the UFT system are $60 billion, 3.8, and 12.4%, respectively. The values of NPV and B/C ratio of the system along with the comparison of the system internal rate of return with the market discount rate clearly show the economic viability of the UFT system.