The national Institute on Drug Abuse has spent $15 million on clinical trials to
ID: 1848797 • Letter: T
Question
The national Institute on Drug Abuse has spent $15 million on clinical trials toward finding out whether two vaccines can end the bad habits of nicotine and cocaine addiction. A switzerland based company is now testing an obesity vaccine. If the vaccines are semi- sucessful such that treatement costs and medical bills are reduced by an average of $15,000 per person per year, what is the present worth of the vaccines if there are 10 million beneficiaries in year 1 and an additional 15% each year through year 5? Use an interest rate of 8% per yearExplanation / Answer
the problem is numeric extensive so i will just tell you the steps. first find the benificiary each year year no. Beneficiary(million) 1 -------------- 10 2 --------------10(1.15) 3 --------------10(1.15)^2 4 --------------10(1.15)^4 5--------------- 10(1.15)^5 Then just divide the saving(no.of benificiary*15000) for ith year by (1.08)^i add the saving for 5 years.