Expected monetary value (EMV) is computed by which equation?

According to the PMBOK® Guide, specifically within the Perform Quantitative Risk Analysis process, Expected Monetary Value (EMV) is a statistical concept that calculates the average outcome when the future includes scenarios that may or may not happen (i.e., analysis under uncertainty).

The Concept: EMV is used to quantify risks (both threats and opportunities) to determine the overall contingency reserve or to choose between different project paths using a Decision Tree.

The Formula:

$$EMV = \sum (P \times I)$$

Where:

$P$ = Probability of the outcome occurring.

$I$ = Impact (the monetary value of the outcome).

Calculation Method: You identify every possible outcome, multiply the monetary value (Impact) of that outcome by its probability of occurrence, and then sum all the results together.

Opportunities are expressed as positive values.

Threats are expressed as negative values.

Analysis of Other Options:

A. Value of each... multiplied by probability: This describes the calculation for a single risk event, but it does not account for the total EMV of a project or a decision node, which requires the sum of all potential outcomes.

B and D. Probability of non-occurrence: These are incorrect. Risk management calculations focus on the probability of the event actually happening ($P$). While the probability of non-occurrence ($1 - P$) exists, it is not the multiplier used to determine the expected value of the risk itself.