Question

Consider a $5,000 payment that is to be received exactly three (3) years from now. If the discount rate is 5%, what is the “present value” of the future $5,000 payment?

Group of answer choices

a. $4,319.19

b. $4,750.00

c. $4,761.90

d. $5,788.13

A pharmaceutical firm has recently developed a new medication, and is now considering whether or not to market the new medication over the next two years. The firm has decided to use “cost-benefit analysis” to make its decision, and has chosen a discount rate of 10%.

The medication is expected to generate benefits (revenues) in the form of $1 million in year one and $4 million in year two. What is the total present value of these dollar amounts?

Group of answer choices

a. $3.757 million

b. $4.132 million

c. $4.215 million

d. $4.545 million

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Question 61 pts

A pharmaceutical firm has recently developed a new medication, and is now considering whether or not to market the new medication over the next two years. The firm has decided to use “cost-benefit analysis” to make its decision, and has chosen a discount rate of 10%.

However, the costs associated with the medication are $3 million in year one and $1.5 million in year two. What is the total dollar amount of these costs, in present value terms?

Group of answer choices

a. $3.381 million

b. $3.967 million

c. $4.091 million

d. $4.500 million

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Question 72 pts

A pharmaceutical firm has recently developed a new medication, and is now considering whether or not to market the new medication over the next two years. The firm has decided to use “cost-benefit analysis” to make its decision, and has chosen a discount rate of 10%.

In present value terms, what is the total value of this “net benefits stream” over the two years? Is it a positive amount?

Group of answer choices

a. Yes, the total net benefit is $0.500 million

b. Yes, the total net benefit is $0.454 million

c. Yes, the total net benefit is $0.248 million

d. No, the total net benefit is a loss of $0.334 million

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Question 82 pts

A pharmaceutical firm has recently developed a new medication, and is now considering whether or not to market the new medication over the next two years. The firm has decided to use “cost-benefit analysis” to make its decision, and has chosen a discount rate of 10%.

In present value terms, what is the “benefit-cost ratio” of marketing the new medication? Is it greater than one?

Group of answer choices

a. No, the benefit-cost ratio is 0.92

b. No, the benefit-cost ratio is exactly equal to 1.00

c. Yes, the benefit-cost ratio is 1.06

d. Yes, the benefit-cost ratio is 1.34

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Question 92 pts

Suppose that an elderly patient suffering from kidney failure is expected to live for 12 more years, albeit with the discomfort of ongoing dialysis treatment.

The patient has indicated that she would gladly give up 4 of those 12 years, if only she could live in a state of perfect health instead.

Based on her statement, what “QALY value” does she implicitly assign to a given year, if it means having to suffer from her condition?   (Note: Use only the “standard time trade-off” method.)

Group of answer choices

a. 8

b. 1.5

c. 0.67

d. 0.33

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Question 101 pts

The following information has been gathered on the costs and effectiveness of two treatments, A and B, where treatment B is an “older” treatment, while A is a “new” treatment.

(Note: In this problem, dollar figures do not have to be “discounted.” Also, it might help to sketch out a simple “decision tree,” but it is not required to do so.)

Variable	Treatment A	Treatment B
Mortality rate	5%	10%
Life expectancy for survivors	20 years	15 years
Initial treatment cost	$20,000	$5,000
Follow up cost, year one (1)	$5,000	$2,000
Annual follow up costs, all subsequent years	$2,000	$1,000

What is the total cost for a given survivor receiving treatment A? For decedents (assuming sudden death after the initial treatment)?

Group of answer choices

a. $63,000 for survivors and $20,000 for decedents.

b. $63,000 for survivors and $25,000 for decedents.

c. $65,000 for survivors and $20,000 for decedents.

d. $65,000 for survivors and $40,000 for decedents.

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Question 111 pts

The following information has been gathered on the costs and effectiveness of two treatments, A and B, where treatment B is an “older” treatment, while A is a “new” treatment.

Variable	Treatment A	Treatment B
Mortality rate	5%	10%
Life expectancy for survivors	20 years	15 years
Initial treatment cost	$20,000	$5,000
Follow up cost, year one (1)	$5,000	$2,000
Annual follow up costs, all subsequent years	$2,000	$1,000

What is the total cost for a given survivor receiving treatment B? For decedents (assuming sudden death)?

Group of answer choices

a. $17,000 for survivors and $8,000 for decedents.

b. $21,000 for survivors and $5,000 for decedents.

c. $22,000 for survivors and $20,000 for decedents.

d. $26,000 for survivors and $5,000 for decedents.

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Question 122 pts

The following information has been gathered on the costs and effectiveness of two treatments, A and B, where treatment B is an “older” treatment, while A is a “new” treatment.

Variable	Treatment A	Treatment B
Mortality rate	5%	10%
Life expectancy for survivors	20 years	15 years
Initial treatment cost	$20,000	$5,000
Follow up cost, year one (1)	$5,000	$2,000
Annual follow up costs, all subsequent years	$2,000	$1,000

What is the expected cost for those patients receiving treatment A?

Group of answer choices

a. $22,150

b. $60,850

c. $63,000

d. $78,850

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Question 132 pts

The following information has been gathered on the costs and effectiveness of two treatments, A and B, where treatment B is an “older” treatment, while A is a “new” treatment.

Variable	Treatment A	Treatment B
Mortality rate	5%	10%
Life expectancy for survivors	20 years	15 years
Initial treatment cost	$20,000	$5,000
Follow up cost, year one (1)	$5,000	$2,000
Annual follow up costs, all subsequent years	$2,000	$1,000

What is the expected cost for those patients receiving treatment B?

Group of answer choices

a. $19,400

b. $20,200

c. $22,500

d. $23,900

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Question 142 pts

The following information has been gathered on the costs and effectiveness of two treatments, A and B, where treatment B is an “older” treatment, while A is a “new” treatment.

Variable	Treatment A	Treatment B
Mortality rate	5%	10%
Life expectancy for survivors	20 years	15 years
Initial treatment cost	$20,000	$5,000
Follow up cost, year one (1)	$5,000	$2,000
Annual follow up costs, all subsequent years	$2,000	$1,000

Calculate the incremental cost and incremental benefit of the treatment alternatives, (assuming that we’re transitioning from treatment B to treatment A).

Group of answer choices

a. The incremental cost is $83,000; the incremental benefit is 32.5 additional life years.

b. The incremental cost is $60,850; the incremental benefit is 5.5 additional life years.

c. The incremental cost is $41,450; the incremental benefit is 5.5 additional life years.

d. The incremental cost is $19,400; the incremental benefit is 19 additional life years.

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Question 152 pts

The following information has been gathered on the costs and effectiveness of two treatments, A and B, where treatment B is an “older” treatment, while A is a “new” treatment.

Variable	Treatment A	Treatment B
Mortality rate	5%	10%
Life expectancy for survivors	20 years	15 years
Initial treatment cost	$20,000	$5,000
Follow up cost, year one (1)	$5,000	$2,000
Annual follow up costs, all subsequent years	$2,000	$1,000

What is the ICER?

Group of answer choices

a. Approximately $1,437 per additional life year.

b. Approximately $2,182 per additional life year.

c. Approximately $3,289 per additional life year.

d. Approximately $7,536 per additional life year.

Answer 1

(1) Expected Future Payment = $ 5000, Discount Rate = 5 % and Receipt Time = End of Year 3

Therefore, present value = 5000 / (1.05)^(3) = $ 4319.19

Hence, the correct option is (a)

NOTE: Please raise separate queries for solutions to the remaining unrelated questions, as one query is restricted to the solution of only one complete question with up to four sub-parts.