PMP FORMULAE
EV = Earned Value: What is the estimated value of the work actually accomplished
PV = Planned Value: What is the estimated value of the work planned to be done
AC = Actual Cost: What is the actual cost incurred for the work accomplished
BAC = Budget at Completion (the budget): How much did we BUDGET for the TOTAL roject effort
EAC = Estimate at Completion: What do we currently expect the TOTAL project to cost? (a forecast)
ETC = Estimate to Complete: From this point on, how much MORE do we expect it to cost to finish the project
VAC = Variance at completion: As of today, how much over or under budget do we expect to be at the end of the project
- Schedule Variance SV = EV - PV
- Cost Variance CV = EV - AC
- Schedule Performance Index SPI = EV/PV
SPI > 1 means project is ahead of schedule
SPI < 1 means project is behind schedule
- Cost Performance Index CPI = EV/AC
CPI > 1 means project running under budget
CPI < 1 means project running over budget
5. Estimate to completion
ETC = EAC – AC
- Estimate at completion
· EAC forecast for ETC work performed at the present CPI
EAC = BAC / CPI
· EAC forecast for ETC work performed at the budgeted rate
EAC = AC + BAC - EV
· EAC forecast for ETC work considering both SPI & CPI factors
EAC = AC + [(BAC - EV)/ (CPI * SPI)]
- Budget at Completion BAC = Sum of All PVs for the complete project duration
- Variance at completion VAC = BAC – EAC
9. To-Complete Performance Index
o TCPI based on the BAC TCPI = (BAC - EV) / (BAC - AC)
o TCPI based on the EAC TCPI = (BAC - EV) / (EAC - AC)
10. PERT analysis calculates Expected Activity Cost (Ce) using weighted average of these three estimates
Ce = (Co + 4Cm + Cp) / 6
Co = Optimistic Activity Cost
Cp = Pessimistic Activity Cost
Cm = Most likely Activity Cost
11. PERT analysis calculates Expected Activity Duration (EAD or Te) using weighted average of these three estimates
EAD or Te = (To + 4Tm + Tp) / 6
To = Optimistic Activity Duration
Tp = Pessimistic Activity Duration
Tm = Most likely Activity Duration
Standard Deviation SD = (Tp – To)/6
2
Activity Variance = ((Tp – To)/ 6)
Range of the estimate = EAD +/- SD
Example: For EAD = 25 SD =3, Range of Estimate will be 22 to 28 or +/-3 or 25
*To calculate Standard Deviation for a series of items, find corresponding variances and add all variances and then take square root of the total to convert back into standard deviation.
*To find the Expected Activity Duration for the “PROJECT to complete”, calculate separately Expected Activity Duration for each activity on critical Path and add those.
- Total number of potential communication channel = n (n-1) / 2
Where n represents no of stakeholders
13. Critical Path Method
ES (Early Start Date): Starts with O
EF (Early Finish Date): ES + t
LS (Late Start Date): LF –t
LF (Late Finish Date): Start with CP
Float or Slack or Total Float (TF) = LS – ES = LF – EF
Where t is the time taken by an activity
14. Estimates Monetary Value EMV
· EMV = Probability * Impact
Where Probability in % Example: for 70%, it’s 0.7
Impact in Dollar value Example: for $100,000, it’s 100,000
· Contingency Reserve = Sum all risks EMV
15. Present value
n
PV = FV / (1+r)
Where FV = future value
R =rate of interest i.e. 10% will be 0.1
N = number of time periods
16. Net Cash Flow = Net Cash Flow In – Net Cash Flow Out
17. Procurement Management
Target Price is also known as Planned Price or Estimated Price
Profit is also known as Fee
Cost-Plus-Fixed-Fee (CPFF)
Final Price = Actual Cost + Profit
Where Profit = % of Estimated Cost
Cost-Plus-Percentage-Cost (CPPC)
Final Price = Actual Cost + Profit
Where Profit = % of Actual Cost
Example: 15% of Actual Cost $100000, then Profit = 15000
Cost-Plus-Incentive-Fee (CPIF)
Final Price = Actual Cost + Final Profit
Final Profit = ((Target Cost- Actual Cost)* % seller share) + Target Profit
Target Price = Target Cost + Target Profit
* If Final Price is greater than Ceiling Price then Final Price = Ceiling Price
18. Net Present Value
NPV = the project with greatest NPV is selected irrespective of year mentioned when options are given to you to choose projects for initiation.
19. Internal Rate of Return
IRR = the project with greatest IRR is selected when options are available with company to choose projects for initiation.
20. Payback Period
The project with least Payback Period is selected when options are given to you to choose projects for initiation.
21. Benefit Cost Ratio
The project with greatest Benefit Cost Ratio is selected when options are given to you to choose projects for initiation.
Example Cost benefit ratio = 1.7 means Payback is 1.7 times the costs
22. Opportunity Cost
You have two projects to choose from: Project A with an NPV of $45000 or Project B with an NPV of $85000. What is the opportunity cost of selecting Project B?
Ans: $45000
23. Sunk Costs
Its expended costs, accounting standards say that sunk cost should not be considered when determining whether to continue with trouble project
24. Straight line depreciation
Same amount of depreciation is taken every year
25. Accelerated depreciation
It depreciates faster than the straight line