What is expected monetary value in simple terms?
Expected monetary value is the average money result you would expect from a choice if the same set of probabilities repeated many times. It does not predict the exact outcome of the next decision. Instead, it gives you one comparable number built from all stated scenarios, which makes it useful for ranking alternatives under uncertainty.
Do the scenario probabilities have to add up to 100%?
Yes, for each option they should total 100% if the list is meant to represent the complete set of mutually exclusive outcomes. If they total less than 100%, part of the outcome space is missing. If they total more than 100%, you are double-counting probability. Either problem makes the EMV comparison unreliable.
Does the highest EMV guarantee the best decision?
No. The highest EMV means the option has the strongest average expected payoff under the assumptions you entered. A lower-EMV option might still be preferable if it protects cash, limits downside, meets compliance constraints, preserves strategic flexibility, or fits a risk policy better than the pure average-value leader.
Should fixed project cost be subtracted before comparing options?
Yes, if the cost applies to the full decision regardless of which scenario occurs. Fixed setup, implementation, or acquisition cost reduces the net value of the option and should be reflected before ranking alternatives. If a cost only applies in one scenario, it belongs inside that scenario's monetary outcome instead.
What is the difference between EMV and expected value?
In practice, EMV is the decision-analysis version of expected value expressed in money terms. The calculator weights each outcome by its probability, sums the result, and then subtracts any fixed cost to produce a net expected monetary value for each option.
How do I choose the scenario probabilities?
Use evidence where you have it, then be explicit about assumptions where you do not. The probabilities should describe mutually exclusive outcomes for each option, and they should add to 100% so the calculator can build a complete weighted average.
Why does the calculator subtract fixed decision cost?
Because a fixed cost changes the value of every branch in that option. If launching a project costs money up front, the decision should be compared after that cost is included so the net EMV reflects what the option is actually worth.
When should I use a decision tree calculator instead?
Use a decision tree calculator when you want to map the branches visually or when you need to compare multiple stages of uncertainty. This EMV calculator is the faster option when you already know the branch probabilities and just need the probability-weighted payoff ranking.
How much cost overrun can the winning option absorb before it stops leading?
Compare the winner's EMV lead against the runner-up. If the leader only beats the next option by 7,000, then roughly 7,000 of extra fixed cost would wipe out that edge. This is why the cost-overrun buffer is useful: it shows whether the recommendation is comfortably ahead or only narrowly in front.
What does downside probability mean in an expected monetary value calculator?
Downside probability is the share of listed scenarios that still finish below zero after fixed decision cost is included. It helps you see whether the EMV leader wins on average while still carrying a meaningful chance of loss, which is especially useful when two options have similar expected value but very different risk profiles.
Can EMV handle negative outcomes?
Yes. Negative outcomes are part of many real decision trees, and they are handled the same way as positive outcomes by multiplying each outcome by its probability before summing the results. That is often what makes EMV useful for comparing riskier choices.
What should I do if two options have almost the same EMV?
Treat that as a sensitivity warning rather than a tie-breaker you can ignore. A narrow gap means small changes in fixed cost, estimated payoff, or probability could reverse the ranking. In that situation, review the assumptions, compare the downside spread, and decide whether the operationally simpler or lower-risk option deserves more weight than the average value lead.
