Which statement about expressing costs and benefits in risk analyses is correct?

• A. Costs and benefits are expressed on a per-year basis.
• B. Costs and benefits are expressed as one-time values.
• C. Only costs are expressed per year.
• D. Benefits are expressed per year while costs are not.

Answer: (A)

The key idea is to express costs and benefits on a per-year basis so the time dimension can be compared consistently over the analysis horizon. When risk impacts unfold over multiple years, converting both costs and benefits into annual amounts lets you compare their magnitudes in the same time frame and apply discounting to future values. This makes it possible to determine whether the benefits, in present value terms, outweigh the costs across the entire period, not just at a single point in time.

If you used one-time values, you’d miss ongoing impacts that accrue year after year. If only costs were expressed per year, you’d have no aligned comparison with benefits. And if benefits were expressed per year while costs were not, the time-consistency would be broken, making the comparison unreliable. Expressing both sides annually provides a coherent, comparable basis for evaluating risk over time.