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Jiangws's Blog

Formulas for PMP

If you think a formula is missing here but required in PMP exam. Post a comment and we will add tothis table.

1. PERT (P + 4M + O )/ 6 Pessimistic, MostLikely, Optimistic

2. Standard Deviation (P - O) / 6

3. Variance [(P - O)/6 ]squared

4. Float or Slack LS-ES and LF-EF

5. Cost Variance EV - AC

6. Schedule Variance EV - PV

7. Cost Perf. Index EV / AC

8. Sched. Perf. Index EV / PV

9. Est. At Completion (EAC) BAC / CPI,AC + ETC InitialEstimates are flawed

AC + BAC EV Future varianceare Atypical

AC + (BAC EV) / CPI FutureVariance would be typical

10. Est. To CompletePercentage

complete

EAC - ACEV/ BAC

11. Var. At Completion BAC - EAC

12. To Complete PerformanceIndex TCPI

Values for the TCPI index of less then1.0 is good because it indicates theefficiency to complete is less thanplanned. How efficient must theproject team be to complete theremaining work with the remainingmoney?( BAC EV ) / ( BAC AC )

13. Net Present Value Bigger is better (NPV)

14. Present Value PV FV / (1 + r)^n

15. Internal Rate of Return Bigger is better (IRR)16. Benefit Cost Ratio Bigger is better ((BCR or Benefit /

Cost) revenue or payback VS. cost)OrPV or Revenue / PV of Cost

17. Payback Period Less is betterNet Investment / Avg.Annual cash flow.

18. BCWS PV

19. BCWP EV

20. ACWP AC

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21. Order of Magnitude Estimate -25% - +75% (-50 to +100% PMBOK)

22. Budget Estimate -10% - +25%

23. Definitive Estimate -5% +10%

24. Comm. Channels N(N -1)/2

25. Expected Monetary Value Probability * Impact

26. Point of Total Assumption

(PTA)

((Ceiling Price Target Price)/buyers

Share Ratio) + Target Cost

Sigma 1 = 68.27%2 = 95.45%3 = 99.73%

Return on Sales ( ROS )Net Income Before Taxes (NEBT) /Total Sales ORNet Income AfterTaxes ( NEAT ) / Total Sales

Return on Assets( ROA )NEBT / Total Assets ORNEAT / TotalAssets

Return on Investment ( ROI )NEBT / Total Investment ORNEAT /Total Investment

Working Capital Current Assets Current Liabilities

Discounted Cash Flow Cash Flow X Discount Factor

Contract related formulas

Savings = Target Cost ActualCostBonus = Savings x Percentage

Contract Cost = Bonus + Fees

Total Cost = Actual Cost + ContractCost

F rom:http://pmzilla.com/formulas-pmp-pmp

ormulas You Must Know

Acroynyms Used in Formulas

AC Actual Cost of the Work Performed

BAC Budget at Completion (Project budget)

CV Cost Variance

CPI Cost Performance Index

EAC Estimate at Completion

ETC Estimate to Complete

EV Earned Value (Budgeted Cost of the Work Performed)

PV Planned Value (Budgeted Cost of the Work Scheduled)



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SV Schedule Variance

SPI Schedule Performance Index

VAC Variance at Completion

Cost and Schedule Formulas

CV = EV AC

SV = EV PV

CPI = EV / AC

SPI = EV / PV

CV and SV are also known as progress formulas. CPI and SPI are also known as efficiency indicators.

CV (cost variance) measures money. SV (schedule variance) measures time. To get from CV to CPIor SV to SPI, just change the minus sign to a division sign. CPI and SVI are efficiency indicators.

With CV and SV, positive values are good (under budget, ahead of schedule). Similarly, with CPI andSPI, values greater than 1 are good.

Remember that in the cost and schedule formulas, EV is always the first value.

Forecasting Formulas

(simplest formula: typical or no variances) EAC = BAC / CPI

(atypical variances) EAC = AC + (BAC EV)

(typical variances) EAC = AC + (BAC EV) / CPI

(atypical variances) ETC = BAC EV

(typical variances) ETC = (BAC EV) / CPI

Note that the second formulation for EAC could be restated as

EAC = AC + ETC

ETC (estimate to complete) measures work which is still outstanding.EAC (estimate at completion) measures total work when the project is complete.Both are calculated differently depending on whether the variances so far are typical or atypical.

PERT Formulas for Activity Duration Estimating

Activity Length = (P+4M+O) / 6

Activity Std. Dev = (P-O) / 6

Activity Variance = ((P-O) / 6)2

where P is the pessimistic estimate, O is the optimistic estimate and M is the most likely estimate.



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The Activity Length formula is also known as the three point estimate.

Remember that you cannot simply add standard deviations; you must calculate variances (the standarddeviation squared), sum them and then take the square root.

Critical Path Formulas for Activity Duration Estimating

Activity Duration = EF ES or LF LS

Activity Float = LS ES or LF EF

Remember CPM is deterministic, using specific durations; PERT is probabilistic, using statisticalestimates of durations.

Quality Formulas (Normal Distribution)

1 sigma = 68.26%

2 sigma = 95.46%3 sigma = 99.73%

6 sigma = 99.99985%

Financial Formulas

These formulas are used in budgeting and project selection.

Payback period: number of years until the sum of future cash flows equals the initial investment.

PVequation

NPVequation

IRRequation

Examples of using the financial formulas

Payback Period: Obviously this is an extremely rough calculation which does not take intoaccount the time value of money. If the initial investment is $10,000, and the cash flows are:

Year Amount (FV)

1 $2000

2 $2000

3 $2000

4 $2000



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5 $2000

6 $2000

7 $2000

8 $2000

then the payback period is 5 years.

PV: The present value is the discounted value of a future cash flow. A discount is requiredbecause the present value of money is greater than the future value of money. It is expressed:

PV = FV/(1 + r)n, where r is the interest rate (or cost of capital) and n is the years.

What is the present value of an investment which pays $10,000 five years from now with aninterest rate of 10% ?

$10,000 / (1 + .1) 5 = $6209.

NPV: The net present value is the sum of all future discounted cash flows. Using thecalculations from the payback period example, and assuming a 10% cost of capital,

Year Amount (FV) PV

1 $2000 $1818

2 $2000 $1653

3 $2000 $1503

4 $2000 $1366

5 $2000 $1242

6 $2000 $1129

7 $2000 $1026

8 $2000 $933

So the present value of the next 8 years of cash flows is $10,670.

Also remember NPV is *net*, so if there is an initial investment, it must be subtracted. In otherwords, if this investment cost $10,000, the NPV would be $670, not $10,670.

IRR the Internal Rate of Return is the discount rate when the present value of cash flows isthe same as the initial investment. Higher IRRs are preferred to lower ones. IRR is determinedby trial and error, computing NPV with various interest rates.

Other FormulasEV = (% complete) * BAC

VAC = BAC EAC

Communication Channels = (N * (N-1)) / 2 [where N is the number of parties]

Overhead rate = (charge rate per hour pay rate per hour) / pay rate per hour



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Old Acroynms

BCWP Budgeted cost of work performed old term for EV

BCWS Budgeted cost of work scheduled old term for PV

ACWP Actual cost of work performed old term for AC

You probably wont need to know these but theyre here for reference.

http://www.pmpexamguide.com/formulas.html

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