You are managing a site excavation project with an aggressive schedule. if you deliver one month ahead schedule
your company will receive a $300,000 bonus. if you deliver your project on schedule, the bonus will be $200,000
there is a $50,000 penalty for every week that you deliver late
you are no trying to determine if you should repair the old excavator at the cost of $20,000 or purchase a new excavator
at the cost of $150,000
using the following information
- There is 80% chance that you will able to secure your $300,000 bonus with the new excavator. Failure will result in a $50,000 penalty
- Repairing the old excavator will cost you $20,000 and will take two weeks
- There is a 60% chance that you will be able to complete your project on schedule with the repaired excavator and secure $200,000 bonus. Failure will most likely result in a $100,000 penalty
What is the best decision
my question is Answer should be
old excavator EMV = (80% * 300,000 - 20% * 50,000)
new excavator EMV = (60% * 200,000 - 40% * 100,000)
why answer is including -150,000 in first EVM and - 20,000 in Second EMV
