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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.

B.

Scoring Models or weighted scoring models 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. 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. 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)

• • •

C.

D.

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. 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.

F. • • • •

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 (P+4M+O) 6 Activity Standard Deviation P-O 6 Activity Variance (P-O)² (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

PV EV AC BAC EAC ETC VAC

To perform the EVM calculations, you need to first gather the Three measurements: Acronym Term Planned Value Earned Value Actual Cost Budget at Completion Estimate at Completion Estimate to Complete Variance at Completion Interpretation (As of today ... )

What is the estimated value of the work planned to be done? What is the estimated value of the work actually accomplished? What is the actual cost incurred for the work accomplished? How much did we BUDGET for the TOTAL project effort? What do we currently expect the TOTAL project to cost? From this point on, how much MORE do we expect it to cost to finish the How much over or under budget do we expect to be at the end of the project?

Name Cost Variance (CV) Schedule Variance (SV) Cost Performance Index (CPI) Schedule Performance Index (SPI) Estimate at Completion (EAC)

Formula EV-AC EV-PV EV AC EV PV

Interpretation (As of today ... ) NEGATIVE is over budget, POSITIVE is under budget. NEGATIVE is behind schedule, POSITIVE is ahead of schedule. We are getting $ __ worth of work out of every $1 spent. Funds are or are not being used efficiently. We are (only) progressing at __ percent of the rate originally planned. As of now, how much do we expect the total project to cost? $ __ . See formulas at the left.

BAC CPI AC+ ETC NOTE: There are many ways to calculate EAC, depending on the assumptions made. The first AC + (BAC - EV) formula to the right is the one most often asked on the exam. AC + (BAC - EV) CPI Estimate to Complete (ETC) Variance at Completion (VAC) EAC-AC BAC-EAC

Used if no variances from the BAC have occurred or you will continue at the same rate of spending. Actual plus a new estimate for remaining work. Used when original estimate was fundamentally flawed. Actual to date plus remaining budget. Used when current variances are thought to be atypical of the future. AC plus the remaining value of work to perform. Actual to date plus remaining budget modified by performance. Used when current variances are thought to be typical of the future. How much more will the project cost? How much over or under budget will we be at the end of the project?

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