A project manager needs to acquire software for a 15-member project team to use exclusively for three years. Given the following information: Which of the following options is the best for this…

Question

Exhibit

Options

• AMake
• BUpdate
• CBuy
• DLease

• B
  84% (27)
• C
  6% (2)
• D
  9% (3)

Explanation

1. Make ($90,000) 95% chance: $90,000 (no additional cost) 5% chance: $90,000 + $10,000 = $100,000 Expected Cost = (0.95 × $90,000) + (0.05 × $100,000) = $85,500 + $5,000 = $90,500 2. Buy ($200,000) 60% chance: $200,000 40% chance: $200,000 + $60,000 = $260,000 Expected Cost = (0.6 × $200,000) + (0.4 × $260,000) = $120,000 + $104,000 = $224,000 3. Lease ($15,000 + $35/month/user for 3 years) $35 × 36 months × 15 users = $18,900 Total base cost = $15,000 + $18,900 = $33,900 60% chance: + $60,000 = $93,900 40% chance: no extra cost = $33,900 Expected Cost = (0.4 × $33,900) + (0.6 × $93,900) = $13,560 + $56,340 = $69,900 4. Update ($60,000) 80% chance: $60,000 20% chance: $60,000 + $10,000 = $70,000 Expected Cost = (0.8 × $60,000) + (0.2 × $70,000) = $48,000 + $14,000 = $62,000 Among all options, Update ($62,000 expected cost) is the most cost-effective and reliable (80% success rate with no extra cost), making it the best choice for this 3-year software need.

No community discussion yet for this question.