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What is an Erned Value Method ?

By y_siline ·
I don't undestand how to calculate the EMV ?
if i has two projects like bellow :
_________________________________________________
Project | Chance of Winning | Estimated Profit
---------|---------------------|-----------------
Project1 | 50 percent | $120,000
| 50 percent | -$50,000
| |
Project2 | 30 percent | $100,000
| 40 percent | $50,000
| 30 percent | -$60,000

i want you use the projects value as above to make a example for me ?
and which project would bid , why ?

Thank you in advance .

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What is I dont do your homework

by JamesRL In reply to What is an Erned Value Me ...

This looks way too close to a homework question.

If you want a good explanation of earned value, crack a textbook. If you don't have one - I recommend Kerzner - its the bible. Or check out the Project Management Institutes' Project Management Book of Knowledge (PMBOK).

James

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Here's some help:

by DC_GUY In reply to What is an Erned Value Me ...

I won't do it for you but I'll try to explain it better than your teacher did if that's your problem, Mi Hijito.

Multiply each possible dollar profit by the probability of it occurring. That's the "partial expected value" of that portion of the universe of possibilities for that project. When you've done all the multiplications for one project, you've got a complete set of partial expected values. Add them up and you have the "total expected value" for the project.

Do that for all the projects you're considering. (Two in this case.) By visual inspection you can see which one has the largest expected value.

But that was the easy part. Which one you choose depends on the strategy dictated by your financial status and your comfort level in taking risks. For example, if the net worth of your entire company is only $80,000, you probably would not choose to pursue either of these projects because you simply could not afford to take the chance of losing $50,000, no matter how slim a chance it is.

But if the company's net worth is ten million dollars, you'd probably just pick the project with the greatest Total Expected Value. If you follow that strategy consistently because you can afford it, then statistically, in the long run you'll come out ahead of companies that follow any other strategy.

There are other strategies that would be used by companies that fall in between these extremes. One is "maximin" (short for "maximize the minimum"), which is to look at the worst possible outcome of each project and choose the one whose worst possible outcome is the "least bad."

Your textbook should teach you all the other strategies.

Good luck.

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Good study links here

by Hockeyist In reply to What is an Erned Value Me ...

Have a look at these links, nothing better than knowing the subject and coming to your own conclusions. It's not rocket science.

WHAT IS EARNED VALUE MANAGEMENT?
http://www.ams.mod.uk/ams/content/docs/evm2/evmacq2.htm

Defense Acquisition University's Knowledge Sharing Programs
https://acc.dau.mil/simplify/ev.php?ID=33657_201&ID2=DO_TOPIC

MIT OCW. Search for notes on this site.
http://ocw.mit.edu/index.html

Just dig around on these sites. There is a wealth of information and courses there.

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