Expected Value

Bolcares Resources is about to embark on a project and wants to know the expected value. Hence, the company has tasked the project manager to obtain a stable source of Lithium for its company within 224 days. The budget for obtaining the required material has been set at $400,000 CAD. In his analysis, he has come up with the following (keep in mind that the real world will probably have many more risks than the five listed here):

The expected value of the cost of these risks and opportunities

Risk	Calculation	Expected Value of the Cost
	Probability x Impact
A	0.05 x $75,000	$3,750
B	0.15 x $30,000	($4,500)
C	0.75 x $3,000	$2,250
D	0.05 x $2,500	($125)
E	0.15 x 8,000	$1,250
Total Cost		$2,575

The expected value of the time of these risks and opportunities

Risk	Calculation	Expected Value of the Time
	Probability x Impact
A	0.05 x 14 days	0.7
B	0.15 x 56 days	(4.2)
C	0.75 x 56 days	42
D	0.05 x 14 days	(0.7)
E	0.15 x 21 days	3.15
Total Days		40.95 days

Assuming that these are the only risks on the project and answers:

#	Question	Calculation	Answer
1	Best case	$400,000 - $30,000 - $2,500	$367,500
2	Boss or customer's expectations		$400,000
3	Expected value (the best guess as to where you will actually end up)	$400,000 + $2,575	$402,575
4	Worst case	$400,000 + $75,000 +$30,000+$8,000	$486,000

Assuming that these are the only risks on the project and the answers:

#	Question	Calculation	Answer
1	Best case	224 - 28 -14	182 days
2	Boss or customer's expectations		224 days
4	Expected value (the best guess as to where you will actually end up)	224 + 40.95	264.95 days
4	Worst case	224 + 14 + 56 + 21	315 days

Question

Kindly help to provide a detailed analysis to Sponsor/Customer about what the above results mean.