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The purpose of this paper is to quantify the economic costs and benefits of water fluoridation in the city of Townsville, Australia. The study has been undertaken in such a way as to overcome the problems associated with hypothetical cohort analysis in the economic analysis of health projects. The method utilised involves analysing the economic effects on the total population subject to water fluoridation, through the systematic disaggregation and valuation of demographic, dental and economic data. The study indicates that significant economic benefits will accrue to the Townsville community through water fluoridation, under a wide range of conditions and assumptions. [ABSTRACT FROM AUTHOR]