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Treatment Treatment A B Mortality rate 2% 5% Life expectancy for survivors 20 years 10 years Initial treatment cost $10,000 $3,000 Follow-up costs, year 1 $5,000 $1,000 Annual follow-up costs, all subsequent $1,000 $500 уears

Treatment Treatment A B Mortality rate 2% 5% Life expectancy for survivors 20 years 10 years Initial treatment cost $10,000 $3,000 Follow-up costs, year 1 $5,000 $1,000 Annual follow-up costs, all subsequent $1,000 $500 уears

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question

The following information has been gathered on
the costs and effectiveness of the two treatments, A
and B. In this problem, costs and consequences are
not discounted.
a. What is the total cost for the survivors receiving
treatment A? For decedents (assuming sudden
death)?
b. What is the total cost for survivors receiving
treatment B? For decedents?
c. What is the expected cost for those patients
receiving treatment A? And treatment B?
d. Draw a simple decision tree showing the costs
and consequences of each treatment option.
e. Calculate the incremental cost and incremental
benefit of the treatment alternatives.
f. What is the ICER?

Treatment Treatment A B Mortality rate 2% 5% Life expectancy for survivors 20 years 10 years Initial treatment cost $10,000 $3,000 Follow-up costs, year 1 $5,000 $1,000 Annual follow-up costs, all subsequent $1,000 $500 уears
Transcribed Image Text:Treatment Treatment A B Mortality rate 2% 5% Life expectancy for survivors 20 years 10 years Initial treatment cost $10,000 $3,000 Follow-up costs, year 1 $5,000 $1,000 Annual follow-up costs, all subsequent $1,000 $500 уears
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  1. Calculate the incremental cost and incremental benefit of the treatment alternatives.
  2. What is the ICER?
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