fbpx
Do you need customer support or technical assistance? Click here to submit a support ticket...

TOPIC: Decision Tree analysis example in PMBOK 6 is unclear

Decision Tree analysis example in PMBOK 6 is unclear 7 years 10 months ago #14814

  • Rawand Amin
  • Rawand Amin's Avatar Topic Author
  • Offline
  • Junior Boarder
  • Junior Boarder
  • Posts: 21
  • Thank you received: 0
Dear Community,

While reviewing PMBOK 6, I came across an example I was not sure why the preferred result the higher amount.
The example is in Decision Tree analysis. page 435. The preferred result is the higher amount, which is $46M rather than $36M. I thought we should select the option with the lowest cost after doing EMV calculation.

Please find the attached example. Tree Decision example.

Thanks,
Last edit: by Ty Weston, PMP.

Decision Tree analysis example in PMBOK 6 is unclear 7 years 10 months ago #14817

  • Ty Weston, PMP
  • Ty Weston, PMP's Avatar
  • Offline
  • Gold Boarder
  • Gold Boarder
  • Posts: 207
  • Karma: 1
  • Thank you received: 37
Rawand,

Please do not reproduce copyrighted material from the PMI. I removed hem.

EMV is an expected probability value, that's all. It it not an expense theory but a capital issue. If I invest (capital) of $100 and demand of $20 exists, my capital is a loss to -$80. If I invest $100 and demand is high with a probability of $200, my return has a potential of +$100.
The decision will always be the probability of a higher return.
Moderators: Yolanda MabutasMarkus KopkoMary Kathrine PaduaProfessor Kevin ReillyJohn Paul BugarinAnusha JayaramHarry ElstonJean KwandaNeil Baghurst PMPElena ZelenevskaiaErik SmithJoseph FlandersPablo Andres Loayza

OSP INTERNATIONAL LLC
OSP INTERNATIONAL LLC
Training for Project Management Professional (PMP)®, PMI Agile Certified Practitioner (PMI-ACP)®, and Certified Associate in Project Management (CAPM)®

Login