Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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 $_____________.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Intelligence

Authors: Income Mastery

1st Edition

1647773210, 978-1647773212

More Books

Students also viewed these Finance questions

Question

1. Identify and control your anxieties

Answered: 1 week ago