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STR N421 - Lecture 5 - 2011

# 6000 due to productivity drop is additional cost

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Unformatted text preview: 20% 10% 10% 12,000 6,000 0 \$1,800. -6,000 due to productivity drop is Additional Cost (\$) Dr. Maged Ezzat Georgy More More about Probability & Impact 60% We can use cost instead. EV = 24,000*0.1 + 30,000*0.6 + 36,000*0.2 + 42,000*0.1 = \$ 31,800 20% 10% 10% \$31,800. 42,000 36,000 productivity productivity drop) is 30,000 (considering possible 24,000 The The expected cost Cost (\$) Dr. Maged Ezzat Georgy Expected Value Example 3 Suppose a project has a 65 percent chance of being completed successfully and earning a profit of \$2,000,000. If conditions are ideal, it has a 15 percent chance of earning a profit of \$3,000,000. At At the same time, it has a 20 percent chance of failing to be completed and incur a loss of \$700,000. The expected value for profit/loss is \$1,610,000 Dr. Maged Ezzat Georgy ERA ERA Method in Hong Kong Practices Cost estimates are mostly point estimates (i.e., single value estimates based on the most likely cos...
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