When a stakeholder demands the implementation of requirements that are out of scope without additional cost, the project manager should refer to the project's statement of work (SOW). The SOW is a formal document that defines the work activities, deliverables, and timeline a vendor will execute for a customer. It serves as a legally binding agreement that specifies what is included in the project scope and, by extension, what is not. If the stakeholder's demands are not included in the SOW, they are considered out of scope, and the project manager should clarify this to the stakeholder. Implementing out-of-scope requirements without adjusting the project's cost, time, and resources can lead to scope creep, which can jeopardize the project's success.
: The answer is verified with the principles found in the PMI's A Guide to the Project Management Body of Knowledge (PMBOK Guide) and the Professional in Business Analysis Reference Materials provided by PMI12345.

For a multiyear ERP solution project where the business sponsor wants to see value demonstration throughout the project while maintaining the integrity of the final product, the project manager should establish a delivery model that allows for incremental delivery of value. This can be achieved by organizing the project into multiple subsets based on business functions, and delivering each subset as a component of the final product.
This approach aligns with the principles of agile and iterative development, which are part of the PMBOK Guide's practices. It allows for early and continuous delivery of valuable software components, enabling the business to realize benefits incrementally, which is crucial for long-term projects such as ERP implementations12.
References:
"How Do You Decide Which Project Delivery Approach to Take?" PM Network1.
"Methodologies to implement ERP systems - Are they PMBOK guide compliant?" Project Management Institute2.

Earned value (EV) is a technique that measures the performance of a project by comparing the actual work completed with the planned work. It can help the PMO to report the project's health in terms of schedule and cost variance, as well as the schedule and cost performance index. EV can be applied to both predictive and adaptive (agile) projects, as long as the project scope, schedule, and budget are defined and measurable. The PMO can use agile progress, such as the number of features delivered, user stories completed, or story points earned, as an input to calculate the EV KPls. This way, the PMO can provide upper management with the traditional reports that they are used to, while also reflecting the agile nature of the projects. References:
A Guide to the Project Management Body of Knowledge (PMBOK Guide) - Sixth Edition, Chapter 7, Section 7.4.2.1 Practice Standard for Earned Value Management - Second Edition, Chapter 3, Section 3.2.3 Agile Practice Guide, Chapter 5, Section 5.4.2

A minimum viable product (MVP) is the most basic version of a new product with enough functionality and features to appeal to early adopters and validate the concept early in the product development cycle. The concept of an MVP comes from the Lean Startup methodology, which encourages learning and building with scalability in mind. According to its author, Eric Ries, an MVP is the version of a new product that allows a team to collect the maximum amount of validated learning about customers with the least amount of effort.
Building an MVP plays a central role in agile product development. It aligns with agile principles of releasing updates consistently, learning along the way, and prioritizing features based on user feedback. The benefits of focusing on an MVP and scaling it up may vary, but ultimately the purpose is to provide a low-risk testing ground before you invest thousands (or millions!) of dollars into a product before it's ready to sell. MVP testing can provide cost savings, insights into user-centered design, fast business launches, and even getting early investor buy-in. The insights and investment you'll reap early on will help you build the dream product you and your customers have been looking for. Therefore, the project manager should support the team to find and execute the MVP, as this will help them deliver value to the customers, test their assumptions, and make iterative improvements based on feedback. This will also reduce the risk of wasting time and resources on features that are not needed or desired by the customers. The other options are not as effective as the MVP approach. Encouraging and motivating the team with project incentives may boost their morale, but it does not address the root cause of the problem, which is the scope and complexity of the project. Subdividing the team to handle different aspects of the project may improve the division of labor, but it does not ensure that the team is working on the right features or that they are aligned with the customer needs. Organizing project execution to satisfy the project sponsor's request may seem like a good way to meet the expectations of the stakeholder, but it may also lead to over-engineering the product and delivering a solution that is not validated by the market. References:
Understanding the Minimum Viable Product (MVP) in Agile Project Management MVPs and MBIs - Project Management Institute Minimum Viable Product (MVP): What is it & Why it Matters - Atlassian