PMP SUMMARY OF FORMULAS SHEETS

Formula Path:
Integration management knowledge area / Initiation process group
1.1 Develop Project Charter / Tools and Techniques
Project Selection methods

Benefit measurement methods

A. Scoring Models or weighted scoring models

B. Benefit/Cost Ratio (BCR)

Compares the benefits to the cost of different projects
• BCR> I, benefits are greater than the cost
• BCR= I, benefits and costs are same
• BCR< I, costs are greater than the benefits.

C. Payback period
Payback period is the length of time it takes the company to get back the initial cost of producing
the product or service.

D. Discounted cash flow

Present value (PV) can be found from the formula
PV= FV / (1+i)ⁿ
(PV = Present Value / FV = Future Value / i = Interest rate / n = No of years)

E. Net Present Value (NPV)

The Present value of the total benefits (income or revenue) less the costs. NPV allows calculating
the accurate value of the project.
• If NPV calculation> 0, then accept the project
• If NPV calculation <0, then reject the project.
• Formula is complicated.

F. Internal rate of return (IRR)

The rate at which the project inflows and project outflows are equal.
• Most difficult method. / Trial & error method
• Projects with higher IRR value are profitable.
• IRR is the discount rate when NPV = 0.
• IRR assumes that cash inflows are reinvested at the IRR value.

Formula Path:
Time management knowledge area / Planning process group
2.9 Schedule Development / Tools and Techniques
Critical Path Method (CPM)

The critical path method is a schedule network analysis technique that is performed using the schedule
model.
The critical path method calculates the early start and finishes dates, and late start and finish dates for
all schedule activities

TF (F) =LS-ES / TF (F) =LF-EF

• ES = Early Start
• EF = Early Finish
• LS = Late Start
• LF = Late Finish
• TF = Total Float (Total Slack)
Formula Path:
Time management knowledge area / Planning process group
2.9 Schedule Development / Tools and Techniques
Program Evaluation Review Technique (PERT)

These formulas relate to activities to find the duration and standard deviation for a project. These
formulas can also be used for cost estimates

PERT Formulas
PERT or Expected Duration Activity Standard Deviation Activity Variance

(P+4M+O) P-O (P-O)²

6 6 (6)²
(O = Optimistic M = Most likely P = pessimistic)

Formula Path:
Cost management knowledge area / Monitoring and Controlling process group
2.14 Communication Planning / Tools and Techniques
Communication Requirement Analysis

The Impact of the Number of People on Communications Channels

Number Of communication Channels = n (n-1)
2
n= number of people

Formula Path:
Risk management knowledge area / Planning process group
2.18 Quantitative Risk Analysis / Tools and Techniques
Quantitative Risk Analysis and Modeling Techniques

Expected Monetary Value (EMV)

EMV = Probability x Impact

Formula Path:
Procurement management knowledge area / Planning process group
2.20 Plan Purchases and Acquisition / Tools and Techniques
Make or Buy Analysis
• Make or Buy Analysis example
You are trying to decide whether to lease or buy an item for your project. The daily lease cost is $120. To
purchase the item the investment cost is.$1,000 and the daily cost is $20. How long will it take for the lease
cost to be the same as the purchase cost?
Answer Let D equal the number of days when the purchase and lease costs are equal.
$120 D = $1,000 + $20 D
$120 D - $20 D = $1,000
$100 D = $1,000
D= 10. The lease cost will be the same as the purchase cost after ten days. If you think you will need the item
for more than ten days, you should consider purchasing it to reduce total costs.
Formula Path:
Cost management knowledge area / Monitoring and Controlling process group
4.6 Cost Control / Tools and Techniques
Performance Measurement analysis
Earned Value Management (EVM)
o To perform the EVM calculations, you need to first gather the Three measurements:

Acronym Term Interpretation (As of today ... )

PV Planned Value What is the estimated value of the work planned to be done?

EV Earned Value What is the estimated value of the work actually accomplished?

AC Actual Cost What is the actual cost incurred for the work accomplished?

BAC Budget at Completion How much did we BUDGET for the TOTAL project effort?
EAC Estimate at Completion What do we currently expect the TOTAL project to cost?
From this point on, how much MORE do we expect it to cost to
ETC Estimate to Complete finish the
How much over or under budget do we expect to be at the end of
VAC Variance at Completion the project?

Name Formula Interpretation (As of today ... )

NEGATIVE is over budget, POSITIVE is under
Cost Variance (CV) EV-AC
budget.
NEGATIVE is behind schedule,
Schedule Variance (SV) EV-PV
POSITIVE is ahead of schedule.
Cost Performance Index EV We are getting $ __ worth of work out of every $1
(CPI) AC spent. Funds are or are not being used efficiently.
Schedule Performance Index EV We are (only) progressing at __ percent of the rate
(SPI) PV originally planned.

Estimate at Completion As of now, how much do we expect the total project

(EAC) to cost? $ __ . See formulas at the left.

BAC Used if no variances from the BAC have occurred or

CPI you will continue at the same rate of spending.
Actual plus a new estimate for remaining work.
NOTE: There are many AC+ ETC Used when original estimate was fundamentally
ways to calculate EAC, flawed.
depending on the Actual to date plus remaining budget. Used when
assumptions made. The first current variances are thought to be atypical of the
formula to the right is the AC + (BAC - EV)
future. AC plus the remaining value of work to
one most often asked on the perform.
exam.
Actual to date plus remaining budget modified by
AC + (BAC - EV)
performance. Used when current variances are
CPI
thought to be typical of the future.

Estimate to Complete (ETC) EAC-AC How much more will the project cost?

Variance at Completion How much over or under budget will we be at the

BAC-EAC
(VAC) end of the project?