Question - Expected Monetary Value Analysis
Is this representative of the PMP exam?
You are developing a revolutionary new product for the telecom industry. It is a switching product that provides voice, video and data over the same pipeline, but uses a technology that has never been tried before. The potential return on investment for this product is $5 billion. Your estimated development costs are $150 million. If you go it alone, there is a 65% chance that you will succeed. You also decide to look into developing the product with a partner that has specific experience with this new technology. With a partner, there is an 85% chance that you will succeed, but development costs in this case are $250 million, of which the partner is carrying $50 million. Because you are shouldering 80% development costs, you decide to split the ROI with 80% going to you and 20% going to the partner if the project succeeds. What is the best EMV scenario from your organization’s point of view?
a. Build the solution alone for $3.25 billion in potential return
b. Build with a partner with a $4.25 billion in potential return
c. Build with a partner with a $3.37 billion in potential return
d. Build the solution alone for $3.35 billion in potential return