problem in risk management knowledge area

Submitted by vijayavadrevu on Sat, 03/16/2013 - 11:54

Question is:

A contractor estmates that a project has a 0.5 probability of $200,000 profit, 0.3 probability of $50,000 loss and 0.2 probability of break even. The risk score of this project is ..... 

Answer is given as $85000

I would like to know whether "0.2 probability of break even" has any significance here or not, as $85K will be the answer if it is not considered

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General Discussion
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kzg

Sat, 03/16/2013 - 23:16

 "Break even" means $0,00 profit.

So risk score is $200,000*30%+$50,000*50%+$0,00*20%=$85,000

sspawar

Sat, 03/16/2013 - 23:56

 yes better can say - probability of loss and profit is zero (no loss no profit)