1. What is Expected Value Proposition?

The Expected Value Proposition (EVP) calculates the potential value of a decision or investment by considering all possible outcomes, their probabilities, and associated costs. It helps in making informed business decisions in the Canadian market context.

2. How Does the Calculator Work?

The calculator uses the EVP equation:

Where:

• \( Probability \) — Likelihood of success (0 to 1)
• \( Outcome \) — Potential return in CAD if successful
• \( Cost \) — Investment or expense in CAD

Explanation: The equation balances potential gains against their likelihood and subtracts the initial investment to determine the expected value.

3. Importance of EVP Calculation

Details: EVP is crucial for comparing different investment opportunities, assessing risk versus reward, and making data-driven business decisions in the Canadian economic landscape.

4. Using the Calculator

Tips: Enter probability as a decimal (0 to 1), outcome and cost in Canadian dollars. All values must be non-negative.

5. Frequently Asked Questions (FAQ)

Q1: What does a positive EV mean?
A: A positive expected value indicates a potentially profitable opportunity on average in the Canadian market.

Q2: How accurate is this calculation?
A: Accuracy depends on the reliability of your probability and outcome estimates. It's a theoretical expectation, not a guarantee.

Q3: Should I always choose the highest EV option?
A: Not necessarily. Consider other factors like risk tolerance, cash flow needs, and strategic alignment with your Canadian business goals.

Q4: How does this apply specifically to Canada?
A: The calculation is universal, but you should use Canadian dollar values and consider Canada-specific market conditions and tax implications.

Q5: Can EV be negative?
A: Yes, a negative EV suggests the decision would likely lose money on average in the Canadian context.