Question
Tommy is 20 years old. If Tommy quits smoking today, he is expected to gain 10 years in life expectancy through reduced risk of lung
Tommy is 20 years old. If Tommy quits smoking today, he is expected to gain 10 years in life expectancy through reduced risk of lung cancer. However, that benefit is 50 years away, while the cost of quitting is experienced now. Tommy is quite impatient with a discount rate of 10%. Assuming Tommy places a disutility value of $10,000 on quitting smoking, conduct a cost-benefit analysis to determine whether quitting smoking is worth it to Tommy. The net present value of the benefits of quitting is $____________. The net present value of the cost of quitting is $_______________. The net benefit (benefit minus cost) is therefore $_____________.
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