IPMA Practice Exam 2025 – Complete Exam Prep

To calculate the expected monetary value (EMV) of the project, we consider both the potential profits and losses, along with their respective probabilities. The EMV provides a measure of the average outcome of the project, accounting for the likelihood of each scenario.

In this case, there is a 60% chance of earning a $50,000 profit. To find the contribution to the EMV from this outcome, you multiply the profit by its probability:

0.60 * $50,000 = $30,000.

Conversely, there is a 40% chance of incurring a $20,000 loss. To calculate the contribution from this loss, you again multiply the loss amount by its probability. However, since this is a loss, it will be a negative contribution:

0.40 * -$20,000 = -$8,000.

Now, integrating these two calculations together provides the overall EMV:

$30,000 (from the profit) - $8,000 (from the loss) = $22,000.

Thus, the expected monetary value of the project is $22,000. This is why the answer is correct; the calculation reflects the potential outcomes weighted by their probabilities, giving a clearer picture