Question
You are the CEO and your finance department has given you several scenarios for a big project.
Scenario
Description & Likelihood
Return on investment
Scenario 1
Best Case/Everything goes perfect: 10% chance
+50%
Scenario 2
Positive Case/Somewhat better than expected: 20% chance
+20%
Scenario 3
Base Case/Everything goes as expected : 35% chance
+10%
Scenario 4
Negative Case/Somewhat worse than expected: 20% chance
-20%
Scenario 5
Worst Case/Unmitigated disaster: 15% chance
-50%
What is the expected return on investment of this project?
10.0%
5.0%
1.0%
0.0%
-1.0%
Scenario |
Description & Likelihood |
Return on investment |
Scenario 1 |
Best Case/Everything goes perfect: 10% chance |
+50% |
Scenario 2 |
Positive Case/Somewhat better than expected: 20% chance |
+20% |
Scenario 3 |
Base Case/Everything goes as expected : 35% chance |
+10% |
Scenario 4 |
Negative Case/Somewhat worse than expected: 20% chance |
-20% |
Scenario 5 |
Worst Case/Unmitigated disaster: 15% chance |
-50% |