TOPIC: EMV question

Need answer for the below question which I saw in one of the mobile apps.

You are managing a software engineering project,when two team members come to you with a conflict. The lead developer has identified an important project risk: you have a subcontractor that may not deliver on time. The team estimates that there is a 40% chance that the subcontractor will fail to deliver, if that happens, it will cost an additional $15,250 to pay your work engineers to rewrite the work and the delay will cost the company $20,000 in lost business. Another team member points out an opportunity to save money an another area to offset the risk:if an existing component can be adapted,it will save the project $ 4500 in engineering costs. There is a 65% probability that that team can take advantage of that opportunity. What is the EMV of these two things?

A.-$14,100

B.$6100

C.-$11,175

D.$39,750.

Could you please let me know the answer with an explanation?

Thanks!
Ganesh

Can you quote the name of the mobile app where you got this question?

Answer: C

To calculate the expected monetary value (EMV) of a set of risks and opportunities, multiply each probability by its total cost and add them together. In this question, the cost of the risk is –$15,250 + –$20,000 = –$35,250, so its EMV is 40% x –$35,250 = -$14,100. The value of the opportunity is $4,500 and its probability is 65%, so its EMV is 65% x $4,500 = $2,925. So the total EMV for the two is –$14,100 + $2,925 = –$11,175.

Thank you Rahul for your answer and explanation.

Name of the mobile app: PMP TEST PREP.