A risk has a 30% probability of occurring and would cost the project $50,000 if it occurs. A separate opportunity has a 40% probability and would save $20,000. What is the net expected monetary value (EMV) of these two events combined?

Question

Accepted Answer

-$7,000. EMV of the threat = 0.30 × (-$50,000) = -$15,000. EMV of the opportunity = 0.40 × (+$20,000) = +$8,000. Net EMV = -$15,000 + $8,000 = -$7,000. Choice D counts only the threat, ignoring the opportunity.

A risk has a 30% probability of occurring and would cost the project $50,000 if it occurs. A separate opportunity has a 40% probability and would save $20,000. What is the net expected monetary value (EMV) of these two events combined?

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