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Best and Worst Estimate

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You are planning the manufacture of a new product. Your project estimate results in a net projectCost of US $400,000 and 224 days. In addition, your analysis has come up with the following (keep in mind that the real world will probably have many more risks than the five listed here):

a.) A 5% probability of a stakeholder making a major change to the project, costing the project $75,000 and a 14 day delay.
b.) A 15% probability of gaining a new, valuable resource, making the project $30,000 cheaper than expected and saving 28 days.
c.) A 75% probability that the software will be delayed in its release from the vendor, resulting in an extra $3,000 labor expense and a 56 day delay.
d.) A 5% probability that the coding may be simpler than expected, resulting in a $2,500 saving and saving 14 days.
e.) A 15% probability of a major bug causing $8,000 of rework and a 21 day delay.

Question 1: Answer the following in relation to COST: What is the expected value of each of these risks? What is the bet case total cost(only good things happen)? What is the worst case total cost (only bad thing happen)?
Question 3: Answer the following in relation to TIME: What is the expected value of each of these risks? What is the bet case total cost(only good things happen)? What is the worst case total cost (only bad thing happen)?

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Solution Summary

The solution answers the questions precisely. Step by step instructions are given which are very easy to understand and follow along. All the calculations are shown as well.

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Answer 1:
Expected Value of each Risk (+ denotes a benefit/savings, - denotes added cost):
a) .05*(-75,000)= -3,750
b) .15*30,000 = +4,500
c) .75*(-3,000) = -2,250
d) .05*2,500= +125
e) ...

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