Research Article
Dec 1974
Reward-Risk Ratio
Authors: Marvin Gates and Amerigo Scarpa, F.ASCEAuthor Affiliations
Publication: Journal of the Construction Division
Volume 100, Issue 4
Abstract
Reward-Risk Ration (RRR) is a probabilistic measure of the investment quality of a venture. It is especially applicable whenever it is necessary to assume some degree of risk of loss to maintain a competitive pricing policy. This is frequently encountered when bidding for construction contracts. The RRR is the ratio of the expectation values of profit and loss expressed as averages over the percentages of the unit times that the project does or does not break even. The analysis adds a probability scale based on the triangular distribution of production rates to the familiar break even chart. Consequently, the related expected monetary values are charted and the factors in the preceding equation are formulated. Generally, the relationships investigated include: fixed and variable costs, total expenses, unit bid price, total income, range and variance of production rates, break-even production rate, profit, loss, expectation values, and probability of production based on a triangular distribution.
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Published In
Journal of the Construction Division
Volume 100 • Issue 4 • December 1974
Pages: 521 - 532
Copyright
© 1974 American Society of Civil Engineers.
History
Published in print: Dec 1974
Published online: Feb 11, 2021
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Authors
Affiliations
Marvin Gates
Pres., Construction Estimating, Inc., West Hartford, Conn., and Vice Pres., Gates-Scarpa and Assocs., Inc., Elmwood, Conn.
Amerigo Scarpa, F.ASCE
Pres., Gates-Scarpa and Assocs., Inc., Elmwood, Conn., and Vice Pres., Construction Estimating, Inc., West Hartford, Conn.
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ASCE Library Cards let you download journal articles, proceedings papers, and available book chapters across the entire ASCE Library platform. ASCE Library Cards remain active for 24 months or until all downloads are used. Note: This content will be debited as one download at time of checkout.
Terms of Use: ASCE Library Cards are for individual, personal use only. Reselling, republishing, or forwarding the materials to libraries or reading rooms is prohibited.
Terms of Use: ASCE Library Cards are for individual, personal use only. Reselling, republishing, or forwarding the materials to libraries or reading rooms is prohibited.