eco assignment

ECON3150

Economic Evaluation Assignment

The following should be submitted in a word document in which you show the steps of each analysis and answer the questions below. Your submition is due Sunday May 26th, by 11:30pm.

1. Cost Effectiveness Study:

The health authorities are considering the treatment alternatives for three types of diseases: heart disease, cancer, and infectious disease. Each year there are 10,000 new cases of heart disease, 10,000 new cases of cancer, and 5,000 new cases of infectious disease. For each diagnosis, there are a number of mutually independent treatment alternatives (including no treatment) as shown in the following table.

Use the following table to complete a cost effectiveness analysis for each disease category (heart disease, cancer, infectious disease) following these steps:

i. Rank the alternative treatment options by health benefit (begin with lowest benefit)

ii. Eliminate treatment alternatives that are strictly dominated

iii. Calculate the ICER between each treatment option and the next most expensive option

iv. Eliminate treatment options that display extended dominance

Be sure to document and report each step.

	Cost per treatment	QALYs gained
Heart Disease
A	0	0
B	100	2
C	800	15
D	400	8
E	600	12
F	300	8
Cancer
G	0	0
H	500	12
I	600	9
J	700	14
K	800	15
L	200	8
M	400	10
Infectious Disease
N	0	0
O	100	2
P	650	6
R	350	4
S	600	8

2. Cost Benefit Analysis

The data below represents projected costs and benefits of building a new hospital in Athens, OH. The costs include construction costs, maintenance costs, and opportunity costs. The benefits are an estimated like dollar benefit to the users of the potential hospital. Use this data below (and/or the same data in the accompanying excel file named Cost Benefit Analysis) to fill in the table with the net benefits (Benefit-Cost), the discounted net benefit, and the net present value (NPV) and then answer the questions below. Use a benchmark discount rate of 0.05. Submit in one document, the completed table and your responses to the questions below.

Respond to the following question:

a. According to your cost benefit analysis, is this an economically viable project and why?

b. How sensitive is your analysis to the discount rate? Is there a discount rate that is results in the net present value equaling zero? How does this value compare to the benchmark discount rate of 0.05? For the project to be economically viable, do we need to be more or less future oriented?

Year	Cost	Benefit	B-C	Discounted
0	10,000,000.00	0
1	50,000.00	1,000,000.00
2	600,000.00	1,150,000.00
3	1,150,000.00	1,322,500.00
4	1,700,000.00	1,520,875.00
5	2,250,000.00	1,749,006.25
6	2,800,000.00	2,011,357.19
7	3,350,000.00	2,313,060.77
8	3,350,000.00	2,660,019.88
9	3,350,000.00	3,059,022.86
10	3,350,000.00	3,517,876.29
11	3,350,000.00	4,045,557.74
12	3,350,000.00	4,652,391.40
13	3,350,000.00	5,350,250.11
14	3,350,000.00	5,350,250.11
15	3,350,000.00	5,350,250.11
16	3,350,000.00	5,350,250.11
17	3,350,000.00	5,350,250.11
18	3,350,000.00	5,350,250.11
19	3,350,000.00	5,350,250.11
20	3,350,000.00	5,350,250.11
			NPV