economics · cashflow
EMV (Multi-Outcome)
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Inputs
Paste one row per line — separate columns with a comma or tab: Probability (fraction), Outcome Value ($)
⚠ Needs at least 2 valid rows to calculate — 0 so far.
Description
Computes expected monetary value across an arbitrary number of discrete, probability-weighted outcomes — the general N-outcome form of emv's 2-outcome (commercial success / dry hole) special case, for a decision with more than two meaningfully distinct scenarios (e.g. low/mid/high case, or a multi-stage appraisal-then-development decision tree).
Variables
| Symbol | Unit | Description |
|---|---|---|
| EMV | $ | Expected Monetary Value |
| Pᵢ, Vᵢ | — | One row per discrete outcome: its probability and its monetary value (NPV or net cash value if that outcome occurs — can be negative, e.g. a dry hole's sunk cost). All row probabilities together should sum to 1.0 — this calculator checks the sum and flags a warning if it doesn't, since the array-input schema itself has no built-in cross-row constraint; getting the probabilities to sum to 1 is the user's responsibility, not something the pasted-table UI enforces before you calculate. Paste at least 2 outcomes. |
Assumptions
- Each row's outcome is mutually exclusive of every other row — no two rows can both occur.
- Outcome values are themselves already fully evaluated (pre-tax, per this discipline's standing convention) — this calculator does not compute them.
- Probabilities are genuine pre-decision estimates, not post-hoc adjustments.
Limitations
- The array-input schema has no built-in mechanism to enforce that row probabilities sum to 1.0 — this calculator checks at calculate-time and flags a warning if they don't, but cannot prevent an incomplete or inconsistent scenario set from being entered and calculated.
- Does not itself derive any outcome's probability or value — accuracy depends entirely on the quality of the entered scenario table.
- For exactly two outcomes (commercial success / dry hole), emv's own dedicated 2-input form is simpler to use and produces an identical result for equivalent inputs.
Use Cases
- → Multi-scenario prospect or project evaluation: Evaluate a decision with more than two meaningfully distinct outcomes — e.g. a low/mid/high reserves case, or a multi-stage appraisal-then-development decision tree — instead of collapsing it into a single success/failure pair.
- → Portfolio-level risk-weighting: Combine several distinct commercial outcomes (different field sizes, different development concepts) into a single risk-weighted value for portfolio comparison.
Related Calculations
Region Notes
General
Multi-outcome scenario probabilities are typically built from a discretized reserves or price distribution (e.g. P90/P50/P10 cases) rather than independently estimated per row — ensure the entered probabilities are internally consistent with whatever distribution they were derived from.
References
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