In order to calculate the stream of benefits that would enable the Net Present Value (NPV_{Benefit} - NPV_{cost}) to be __>__ 0 for the risk management scenario, the following assumptions are made:

- The time horizon over which benefits occur is set at 20 years;
- Benefits start in Year 2 (benefits are zero in year 1); and
- The benefits are the same each year from Year 2 to 20.

Using these assumptions, the annual benefit for years 2-20 can be calculated using the following formula (where *r* is the discount rate):

AnnualBenefit = | NPV_{cost} |

[(1+r)^{2} + (1+r)^{3} + (1+r)^{4} + ... + (1+r)^{20} ] |

Where:

*AnnualBenefit*is the benefit calculated for years 2-20 that satisfies the economic valuation testis the Net-Present-Value of the risk management scheme's costs__NPV___{cost}*r*is the discount rate