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TOPIC: Decision Tree analysis example in PMBOK 6 is unclear

Decision Tree analysis example in PMBOK 6 is unclear 4 years 5 months ago #14814

  • Rawand Amin
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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 4 years 5 months ago #14817

  • Ty Weston, PMP
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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.
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