Week 5 Assignment

Due Date: 11:59 pm EST Sunday of Unit 5
Points: 100

Overview:
After qualitative risk analysis of project risks, quantitative risk analysis is used for risk of
high priority (either high threat or opportunity risks). This assignment focuses on some
common quantitative risk analysis tools/ techniques.
Decision Tree Analysis is one of the tools and techniques of quantitative risk analysis.
Decision trees use Expected Monetary Value (EMV) which is another tool/ technique of
quantitative risk analysis. Program Evaluation and Review Technique (PERT) is another
tool which uses estimation to complete quantitative risk analysis.

Remember:
The Impact used in EMV is in days or dollars.
PERT is a particular type of 3-point estimation, where the Most Likely estimate is
weighted 4 times the optimistic or pessimistic estimates. All 3 estimates are used to
calculate PERT.
Below are exercises in both decision tree analysis and PERT estimation.

Instructions for Exercise 1 and Exercise 2:
Exercise 1
Scenario: You are the project manager on a project and you are developing the project
schedule, this includes estimating the duration of activities for the project. You ask one
of your team members how long it will take them to complete development of a feature
in a web application. You want to provide the best numerical estimate possible so you
employ the tool/ technique of PERT estimation.

Your team member provides the following estimates for this activity:

• Optimistic= 5 days

• Pessimistic= 20 days

• Most Likely= 12 days

Be sure to answer the following:
• What is the equation used for the PERT estimate?

• What is the PERT estimate for this activity?

BUS623 – Project and Risk
Managment

Quantitative Risk Analysis

Exercise 2:
Given the following Decision Tree, perform decision tree analysis to determine which is
best to do, make or buy a software application as part of a development project?
Remember that this requires the use of EMV.

The Simple and Difficult solutions of the Make decision have costs and losses
associated with them, as shown in this diagram. The Buy decision also has costs
associated with them. Note: The probabilities of the branches do not add up to 100%,
as this is not required.

Be sure to answer the following:

• What is the equation for EMV?

• Should you make or buy the system?

Note: When calculating the EMV, please make sure profits are calculated as positive (+)
values and losses are calculated as negative (-) values.

Requirements:

• APA format (references, if applicable)
• No page length required. Please show all of your work for both exercises, so it

may be graded properly.

Be sure to read the criteria by which your work will be evaluated before you write
and again after you write.

System

Make

Profit
[$50,000]

Simple
[$23,000]

Difficult
[$34,000]

Buy

Minor Changes
[$17,000]

Major Changes
[$35,000]

Profit
[$35,000]

30%

70%

90%

65%

90%

35%

Evaluation Rubric for Earned Value Management Case Study Assignment

CRITERIA Exemplary Proficient Needs
Improvement

Deficient

(40 points) (32 – 39 points) (24 – 31 points) (0 – 23 points)
PERT
Estimate
Calculation

PERT
Estimation
assessed
following best
practices and
demonstrating
an excellent
understanding
of the tool/
technique.

PERT Estimation
assessed well,
demonstrating a
good
understanding of
the tool/
technique.

Some
improvements
can be made to
the PERT
Estimation
assessment.

PERT
Estimation
assessment
does not meet
requirements

(40 points) (32 – 39 points) (24 – 31 points) (0 – 23 points)
Decision
Tree
Analysis

Decision Tree
Analysis
following best
practices and
demonstrating
an excellent
understanding
of the tool/
technique.

Decision Tree
Analysis done
well,
demonstrating a
good
understanding of
the tool/
technique.

Some
improvements
can be made to
the Decision
Tree Analysis.

Decision Tree
Analysis does
not meet
requirements.

(20 points) (16-19 points) (12-15 points) (0-11 points)
Clear and
Professional
Writing and
APA Format

Writing and
format is clear,
professional,
APA
compliant, and
error free.

Few errors that do
not impede
professional
presentation. Sign
ificant errors that
do not impede
professional
presentation.

Significant errors
that do not
impede
professional
presentation.

Writing and
format is clear,
professional,
APA compliant,
and error free.
Errors impede
professional
presentation;
guidelines not
followed.