Question

Excessive and improper use of antibiotics is contributing to the resistance of many diseases to existing antibiotics. Consider a regulatory program in Canada that would monitor antibiotic prescription by physicians. Analysts estimate the direct costs of enforcement to be $50 million, the time costs to doctors and health professionals to be $250 million, and convenience costs to patients to be $190 million annually. The annual benefits of the program are estimated to be $360 million in avoided resistance costs in Canada, $80 million in health benefits from better compliance with prescription, and $300 million in avoided resistance costs in the rest of the world.

With the information above and any additional information you can find and your own reasonable assumptions, undertake a rough cost benefit analysis

1. How will you quantify and monetize all your identified (10)

-Costs

-Benefits

-What time frame will you use and why?

2.With a spreadsheet estimate (30)

-The Present Value Cost – Economic

-The present Value Benefits – Economic

-Discuss any qualitative costs and benefits

3.With the following criteria, determine whether the project is economically feasible (10)

-Net Present Value Criteria

-Benefit Cost Ratio

Answer 1

Cost-benefit analysis is a traditional and economical process businesses use to analyze decisions. The business or analyst sums the benefits and then subtracts the costs associated with taking that work.

Cost benefit = Benefits - Cost.

Answer ) 1.

-Costs : direct costs of enforcement to be $50 million, the time costs to doctors and health professionals to be $250 million, and convenience costs to patients to be $190 million annually

Total cost = $50 + $250 +$190 = $ 490 million

-Benefits :  $360 million in avoided resistance costs in Canada, $80 million in health benefits from better compliance with prescription, and $300 million in avoided resistance costs in the rest of the world.

Total Benefits = $ 360 +$80+$300 = $$740 miliion

-What time frame will you use and why?

As the value of cost and benefits are given for yearly basis. The time frame used in study will be 1 year.

Answer 2)

The Present Value Cost - using formula of PV(rate,nper,pmt,fv,type) as PV( rate, 1, $490,0,0) in the spread sheet.

The present Value Benefits - using formula of PV(rate,nper,pmt,fv,type) as PV( rate, 1, $740,0,0) in the spread sheet.

Discussion on qualitative costs and benefits :

Here on the program to stop excessive and improper use of antibiotics is contributing to the resistance of many diseases to existing antibiotics. Such program is not only provide economic benefits to public in short run but provide benefits for longer periods to society by saving regular expanses in medicine and health.

Answer 3) determine whether the project is economically feasible

_ Net present value criteria - the NPV is positive as persent value of cost is less than the present value of benefits.

-Benefit Cost Ratio : value is positive and higher than 1 ; (740/490) .

Project is feasible by use of the both criteria.