Exam PMP topic 1 question 888 discussion

Expected Monetary Value (EMV) is a decision-making tool used to quantify the value of different alternatives by considering their possible outcomes, probabilities, and associated costs. When faced with a "build vs. buy" decision, a project manager can use EMV to weigh the potential costs and benefits of each option based on probability-adjusted values, helping the steering committee make an informed choice.

When evaluating the decision between build versus buy delivery options, Net Present Value (NPV) is a key value metric to consider. NPV helps assess the financial viability of an investment by calculating the present value of expected future cash flows. In the context of build versus buy decisions, the NPV can be used to compare the costs and benefits of building a solution in-house (build) versus purchasing an existing solution from an external vendor (buy). The option with a higher positive NPV is generally considered more financially favorable.

Net present value (NPV) takes into account the time value of money, discounts future cash inflows and outflows to their present value, and allows for a comprehensive comparison of the total financial implications of both build and buy options. This makes it the most relevant metric for assisting the steering committee in making an informed decision based on financial considerations.

With NPV the Project Manager can understand the ROI based on which he can make his decisions.

NPV - Is the investment planning to analyze the profitability of a projected investment or project