Suppose That a Year of Life Is Worth $150,000 and That

question 23

Essay

Suppose that a year of life is worth $150,000 and that a new treatment for diabetes increases life expectancy for a 40-year old woman by 2 years. Suppose, further, that the treatment will cost $50,000 in present value per woman. If the discount rate is 3 percent (i = 0.03) determine if this treatment is worth the cost.

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