TOPIC: PMP - Decision Tree Question

You are asked to choose between two projects A or B based on the highest gain (or
the lowest loss). A will cost U.S. $650,000 and B will cost U.S. $467,000. There is a
56% chance that project A will be successful, which will result in a gain of U.S.
$1,800,000. If project A fails there will be a loss of U.S. $900,000. There is a 67%
project B will be successful, and that will result in a U.S. $950,000 gain. If Project B
fails there will be a loss of U.S. $670,000. Based on this information, what is the
value of the best alternative?
A. U.S. $-38,000
B. U.S. $38,000
C. U.S. $-51,600
D. U.S. $51,600

Answer A

Monique Maxmillion wrote: You are asked to choose between two projects A or B based on the highest gain (or
the lowest loss). A will cost U.S. $650,000 and B will cost U.S. $467,000. There is a
56% chance that project A will be successful, which will result in a gain of U.S.
$1,800,000. If project A fails there will be a loss of U.S. $900,000. There is a 67%
project B will be successful, and that will result in a U.S. $950,000 gain. If Project B
fails there will be a loss of U.S. $670,000. Based on this information, what is the
value of the best alternative?
A. U.S. $-38,000
B. U.S. $38,000
C. U.S. $-51,600
D. U.S. $51,600

A

The answer is as stated above.
Here is break down :
Apply the EVM equation :
Project A. -$650,000 +(56% *×1,800,000 ) + (-44% of the $900,000) = -$38,000