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CAPM Practice: Demonstrate an understanding of common problem-solving tools and techniques

Question 104 of 106 in Demonstrate an understanding of common problem-solving tools and techniques

A project manager is using a decision tree to evaluate two options for resolving a technical problem. Option A costs $50,000 and has a 70% chance of success. Option B costs $30,000 and has a 90% chance of success. Based on expected monetary value, which option is better?

Show answer & explanation

Correct answer: Option B, because it has both lower cost and higher chance of success

Explanation

Expected value = probability of success × value. Comparing: Option A: 70% chance of success at $50,000 cost; Option B: 90% chance of success at $30,000 cost. Option B dominates on both dimensions — higher probability and lower cost — making it clearly preferable. A decision tree would visually represent these probability-weighted outcomes.

**Why not A:** Option A actually costs $50,000, which is $20,000 more expensive than Option B, not $20,000 in savings. This choice misrepresents the cost comparison and ignores that Option A also has a lower probability of success.

**Why not B:** There is sufficient information to compare the two options using expected monetary value. Both costs and probabilities are provided, which is all that is needed for a decision tree analysis. Requesting more information would unnecessarily delay the decision.

**Why not C:** Option A has a 70% chance of success, which is actually lower than Option B's 90% chance. This choice incorrectly attributes a higher success rate to Option A, reversing the probability figures given in the question.

Key Concept

This question covers Demonstrate an understanding of common problem-solving tools and techniques under Demonstrate an understanding of common problem-solving tools and techniques (Project Management Fundamentals and Core Concepts).

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