Question

All of the following are true concerning expected monetary value (EMV)

except:

a Decision tree analysis is more effective using net present values (NPV) in

its calculations rather than EMV.

b The EMV of an opportunity is generally a positive value.

c EMV is a statistical concept that calculates the average value of a future

scenario that may, or may not happen by multiplying the value of each

possible outcome by the probability of it occurring and summing the

products.

d The EMV of a threat is generally a negative value.

Answer 1

The best answer is A

 i EMV is calculated by EMV = probability * impact.

 ii If there are several different possibilities, the EMV is calculated for

each option and the EMVs added together to give an overall, value.

 iii Decision tree analysis is based on EMV.

 iv NPV = Net Present Value, this is a different calculation.