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PMP question - RISK quantitative analysis

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PMPEngineer
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PMP question - RISK quantitative analysis

Postby PMPEngineer Sat Mar 11, 2017 9:55 pm

I'm trying to solve this question from HeadFirst Labs book, but I believe the answer the book is saying is incorrect. I think the answer should be a +30.7 and not -30.7, please let me know your thoughts on this:

Prob Imp
35% cost $48 to replace equipment
5% lose $750 in damage costs
15% save $800 in battery costs
10% cost $350 for last-minute rental

What is total EMV? The book says it should be a "-$30.70" and that if you add $30.7 to your budget you will account for risks? I am struggling with this, I think you should not reduce budget at all in this case since in fact you get a saving of $30.7 cumulative EMV of the risks. Let me know your thoughts please.
manishpn
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Re: PMP question - RISK quantitative analysis

Postby manishpn Mon Mar 13, 2017 1:22 pm

Its EMV and not EV... please read it carefully and think through
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sm365
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Re: PMP question - RISK quantitative analysis

Postby sm365 Tue Mar 14, 2017 10:15 am

Hi - As per RITA's EMV calculation follow this approach.

Treat add every threat and remove every opportunity.

35% cost $48 to replace equipment : THREAT : + $16.8
5% lose $750 in damage costs : THREAT : + $37.5
15% save $800 in battery costs : OPPORTUNITY : - $120.0
10% cost $350 for last-minute rental : THREAT : + $35.0

Add them and you will get -$30.7 as total EMV of the RISK. Therefore you should add $30.7 to your contingency reserve.

Hope this helps.
Mohammed Shabbir
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Re: PMP question - RISK quantitative analysis

Postby VCAB Wed Mar 15, 2017 6:39 pm

Rita is somehow confusing, on page 424 (in the note below the practice table--top of the page), the book states, "Note that for opportunities, expected monetary value is often represented as a positive amount... whereas threats are usually presented as a negative number". T'his was used for decision making on alternatives, I guess.

Then on page 434 answer for the exercise, (used for risk reserve), threats are added (+) and opportunities are negative (-).

So my question, are EVM values labeled differently when selecting alternative then when calculating reserve? The same book, Rita seem contradictory or at best confusing...Please help

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