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) VAC = BAC – EAC 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 TCPI = BAC-EV/BAC-AC TCP (EAC Based) = BAC-EV/EAC-AC
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)n  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.