PMP Math Formulas

Acronym AC BAC

Meaning Actual Cost Budget At Completion

Description The Actual amount of money the project has spent to date. The sum of all the budget values established for the work to be performed on a project or a work breakdown structure component or a schedule activity. The total planned value for the project. Refers to the medium used to convey information from a sender (or transmitter) to a receiver. Measures the project based on its financial performance. Measurement of spending efficiency. < 1 means cost overrun > 1 means under budget = 1 means performance matches plan The difference between the earned value amount and the cumulative actual costs of the project. Measurement of cost performance. (-) indicates over budget (+) indicates under budget CV of zero indicates right on budget These forecasting formulas predict the likely completed costs of the project based on current scenarios within the project. The earned value management formula that predicts how much funding the project will require to be completed. There are three variations of this formula, all based on conditions the project maybe experiencing. It is the physical work completed to date and the authorized budget for that work. It is the percentage of the budget at completion (BAC) that represents the actual work completed in the project. EVA is a financial performance method to calculate the true economic profit of a corporation. A benefit comparison model that determines a future value of money. Program Evaluation and Review Technique (Three-Point Estimate). The cost point beyond which the seller incurs all incremental costs, assuming 100% of the risk of cost increases. A benefit comparison model that determines a present value of a future amount of money. Is a financial measure that quantifies how well a company generates cash flow relative to the capital it has invested in its business. When the return on capital is greater than the cost of capital (usually measured as the weighted average cost of capital), the company is creating value; when it is less than the cost of capital, value is destroyed. A measurement of the project based on its schedule performance. Measurement of work efficiency. < 1 means behind plan > 1 means ahead plan = 1 means performance matches plan Standard Deviation of PERT Estimate. The difference between the Earned Value (EV) and the Planned Value (PV). Indicates schedule performance. (-) indicates behind (+) indicates ahead SV or zero indicates right on schedule To Complete Performance Index < 1 is good - you can under-perform > 1 is bad - you must perform better A forecasting formula that predicts how much of a variance the project will likely have based on current conditions within the project. A Variance is the difference between what was expected and what was experienced.
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Formula

CC

Communication Channels

N (N - 1) / 2 (Where N = Number of people in your team) CPI = EV / AC

CPI

Cost Performance Index

CV = EV - AC

CV

Cost Variance

EAC

Estimate At Completion

EAC = BAC / CPI ETC = EAC - AC

ETC

Estimate To Complete

EV = BAC * % Comp

EV

Earned Value

EVA FV PERT PTA PV

Economic Value Add Future Value PERT Estimate Point of Total Assumption Present Value

EVA = Net Operating Profit After Tax - Cost of Capital EVA = (Revenue - Operating Expenses - Taxes) - (Investment Capital x % Cost of Capital) FV = PV (1 + i)n (PV - Present Value ; i - Interest Rate ; n - Number of time periods) (P + 4M + O) / 6 (i.e. P - Pessimistic ; M - Most Likely or Realistic ; O - Optimistic) PTA = Target Cost + ((Ceiling Price - Target Price) / Buyer's Share) Price = Cost + Profit PV = FV / (1 + i)n (FV - Future Value ; i - Interest Rate ; n - Number of time periods) ROIC = Net Income After Tax / Total Capital Invested

ROIC

Return on Invested Capital

SPI = EV / PV

SPI

Schedule Performance Index

STD Deviation Standard Deviation

(P - O) / 6 (i.e. P - Pessimistic ; O - Optimistic) SV = EV - PV

SV

Schedule Variance

(BAC - EV) / (EAC - AC)

TCPI

To Complete Performance Index

VAC = BAC EAC

VAC VAR

Variance At Completion Variance

VAR = BAC - AC

Math Formula Memory Technique Math Formula Memory Technique 3 4 5 6 7 8 BAC * Actual % Complete BAC * Planned % Complete PV EV AC EV PV EV AC EV PV AC *% Comp BAC / CPI AC EAC BAC EAC BAC AC BAC EV / (BAC - AC) EPF CSCS EEE VVT EV = BAC * Actual Deliverables % Complete PV = BAC * Planned Schedule % Complete FV = PV(1 + i)n CV = EV - AC (> 0 Good) SV = EV - PV (> 0 Good) CPI = EV / AC (> 1 Good) SPI = EV / PV (> 1 Good) EAC = AC / % Complete EAC = BAC / CPI ETC = EAC - AC VAC = BAC - EAC VAR = BAC - AC TCPI = (BAC - EV) / (BAC - AC) (< 1 - Good; > 1 - Bad) Note: Deliverables - Example: Rooms Schedule - Example: Days, Weeks

1 E P F C S C S E E E V V T

2 V V V V V PI PI AC AC TC AC AR CPI

EAC at Budgeted Rate = BAC + AC - EV EAC at Present CPI = BAC / CPI EAC using SPI & CPI = [(BAC - EV) / SPI X CPI] + AC FV = PV(1 + i)n Where i - Interest, n - # of time periods PV = BAC * Planned % Complete

Normal Distribution 1 SD = 1 Sigma 1 Sigma = 68.26% 2 Sigma = 95.46% 3 Sigma = 99.73% 6 Sigma = 99.99%

Standard Deviation (SD) = (P - O) / 6 (i.e. P - Pessimistic ; O - Optimistic) PERT = (P + 4M + O) / 6 (Weighted) (P - Pessimistic (High)); (M - Most Likely or Realistic (Middle)) ; (O - Optimistic (Low)) Three Point Estimate = (P + M + O) / 3 (Non-Weighted) Where P = Pessimistic ; M =Most Likely ; O = Optimistic Communication Channels (CC) = N (N - 1) / 2 (Where N = Number of people in your team) ROIC = Net Income After Tax / Total Capital Invested ROIC - Return On Invested Capital Benefit Measurement - Bigger is better EVA = Net Operating Profit After Tax - Cost of Capital (Revenue - Op. Exp - Taxes) - (Investment Capital X % Cost of Capital) EVA - Economic Value Add Benefit Measurement - Bigger is better Source Selection = (Weightage X Price) + (Weightage X Quality)

Note: To memorize the formulas, follow the number pattern for filling the blanks.

Critical Path Forward Pass: (Add 1 day to Early Start) EF = (ES + Duration - 1) Backward Pass: (Minus 1 day to Late Finish) LS = (LF - Duration + 1) ES = Early Start; EF = Early Finish; LS = Late Start; LF = Late Finish Page 2 of 2