Expected Monetary Value, or EMV, is a statistical method used in project management to predict how much a future event or choice might be worth or cost. It’s a way to figure out how much something might cost and how likely it is to happen. It also helps you make decisions based on the odds and costs.
EMV is found by increasing the value of each possible result by the chance that it will happen, and then adding all of those numbers together. For example, if a project manager is deciding between two choices, A and B, that could either work or not, and the chance of success for option A is 70% and the chance of success for option B is 50%, then the EMV for option A would be:
EMV for Option A is (0.7 x $100,000) + (0.3 x $0) = $70,000
Where the possible value of success is $100,000 and the possible value of failure is $0.
The EMV for choice B would be the same:
EMV for Option B is (0.5 x $100,000) + (0.5 x $0) = $50,000
The project manager can use the EMV estimate to figure out which choice has the highest predicted value and then make a decision based on that information. EMV is a useful tool for figuring out what the risks are, what the possible answers are, and how to make choices based on the odds and the financial results.
