The navigation unit uses it’s maps to calculate a route. The maps have speed limit data for the roads. The programmers will put in an average speed for each road type (which would have been calculated from real world driving data). A bit of time will be added to account for stopping at junctions etc.
Standing alone navigation units won’t account for unforseen traffic unless they have a way of getting traffic data. If there is traffic data available that will give an indication of how long the delay is which can then be factored in.
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