Suppose your organization is deciding which of four projects to bid on. Information on each is in the table below. Assume that all up-front investments are no to be recovered, so they are shown as a negative profits. Write a few paragraph on which projects you will bid on. Be sure to use the EMV information and your personal risk tolerance to justify your answer.
Answer:
In a course of Bidding, there may be different projects in hand, all the project looks same. It is very difficult to identify the best project to bid. There are certain calculations, whose result can help to identify the best project. Process includes Quantitative risk analysis like decision tree and expected monetary value (EMV). EMV is a product of risk event probability and the risk event's monetary value.
Project 1's EMV= $60000-$25000= $35000
Project 2's EMV=$30000+$20000-$18000= $32000
Project 3's EMV=$14000-$1500= $12500
Project 4's EMV= $12000+$9000+$4000-$10000= $15000
Since the Project 1 has the greatest value of EMV which is equals to $35000, therefore Project 1 the best. It is beneficial for the organization to bid in the Project 1.
