PMP Formula Key and PMP Concepts

Earn Value Formulas
PV (Planned Value) = BCWS (Budgeted Cost of Work Scheduled 
EV (Earned Value) = BCWP (Budgeted Cost of Work Performed)
AC (Actual Cost) = ACWP (Actual Cost of Work Performed)
SV = EV – PV (A negative value indicates that project is behind schedule)
CV = EV – AC (A negative value indicates that project is over budget)
SPI = EV/PV (Less than 1 is behind schedule)
CPI = EV/AC (Less than 1 is over budget)
EAC = AC + (BAC-EV)    Use when variances are atypical
EAC = AC + [(BAC-EV)/CPI]   Use when variances are typical
(Note: This is the same as EAC = BAC/CPI)
ETC = BAC – EV   Use when variances are atypical
ETC = (BAC – EV)/CPI   Use when variances are typical
ETC = EAC – AC    Use when original estimates were flawed
TCPI - To complete performance Index

Calculating Slack or Floa     t

What is Free Float?
Critical path is the longest path in the project network diagram and it determines the planned duration. A project can have more than one critical path. Critical path may change during the project life cycle.

Total Float (also called Slack, Float, or Project Float) is the total amount of time an activity can be delayed without delaying the project finish date.
Free Float/Slack is the amount of time an activity can be delayed without delaying its successor (following activity).

  Ø  LS – ES:    Calculates slack with forward pass
  Ø  LF – EF:    Calculates slack with backwards pass
Lag Time:  Inserted wait time between activities 
Lead Time: Overlapping activities, also called paralleling or fast tracking.  “Lead In; Lag Out”

For the activities on the critical path float is zero. 

Free Float – Amount of delay we can afford in a predecessor without delaying the early start of successor.
Three Point Estimates, or PERT
 PERT = PROGRAM Evaluation and Review Technique
Holds schedule and lets cost float
3 estimates for each task: Optimistic, Pessimistic, and Most Likely

For Beta or Normal Distribution
Mean Estimate = (O + 4*ML + P)/6
Standard Deviation (s) = (P – O)/6

For Triangular Distribution
Mean Estimates = 0+M+P/3
Accuracy of Estimates
Order of Magnitude:-25% to +75%
Budget Estimate:-10% to +25%
Definitive Estimate:-5% to +10%
Channels of Communication
Between Team Members = N(N-1)/2 where N is the no of  team members
Project Selection Financials or project Appraisal
NPV (Net Present Value) = FV/(1+r)
FV= Future Value, r= interest rate, n= no. of time periods
Higher NPV is better
IRR (Internal Rate of Return) = Solve the NPV equation for “r”
Also called Hurdle Rate
Higher IRR percentage is better
BCR (Benefit/Cost Ratio)
Higher BCR is better.
Beware, exam can call it CBR, where lower is better
ROI (Return on Investment) = Earnings/Investment
Higher ROI is better
Payback Period = Time to recover cost of the project
Lower payback period is better

All the Appraisal techniques mentioned above help  in assessing the business justification of the project.

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