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# TOPIC: PMP - Decision Tree Question

## PMP - Decision Tree Question 6 years 1 month ago #11679

 Monique Maxmillion Topic Author Offline Fresh Boarder Posts: 4 Thank you received: 0 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 Your e-mail address will never be displayed on the site. Check this box to be notified of replies to this topic. Note: BBcode and smileys are still usable.

## PMP - Decision Tree Question 6 years 4 weeks ago #11687

 Aung Sint Offline Junior Boarder Posts: 37 Karma: 1 Thank you received: 8 Dear Monique, The answer should be choice A: US\$-38,000. You need to calculate the EMV of Project A and B, and select the highest gain (more +) or the lowest loss (less -) between EMV of Project A and B. EMV of Project A = -650,000 (cost) + 56% x 1,800,000 (success) - 44% x 900,000 (failure) = -38,000 EMV of Project B = -467,000 (cost) + 67% x 950,000 (success) - 33% x 670,000 (failure) = -51,000 Since -38,000 is bigger than -51,000, this is the answer. Best regards, Aung K. Sint, PMP Your e-mail address will never be displayed on the site. Check this box to be notified of replies to this topic. Note: BBcode and smileys are still usable.
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