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Essential PMP® Formulas

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Project Selection
Bigger is Better: Smaller is Better:
BCR – Benefit/Cost Ratio Opportunity Cost
IRR – Internal Rate of Return Payback Period
PV – Present Value
NPV – Net Present Value
EVA – Economic Value Add
ROI – Return On Investment
ROIC – Return On Invested Capital

Return on Invested Capital (Project Selection – bigger is better)


ROIC= Net Income After Tax ÷ Total Capital Invested

Economic Value Add (Project Selection – bigger is better)


EVA = Net Operating Profit After Tax – Cost of Capital
= (Revenue - Op. Expenses - Taxes) -
(Investment Capital x % Cost of Capital)

PERT Estimate a.k.a. “Three-Point Estimate”


(P + 4R + O) / 6
P = Pessimistic R = Realistic (or Most Likely) O = Optimistic

Standard Deviation of PERT Estimate


(P – O) / 6 Pessimistic less Optimistic divided by 6

Critical Path – the combination of activities that, if any are delayed,


will delay the project’s finish

Copyright © 2007 Velociteach. All rights reserved.


Essential PMP® Formulas (cont’d)
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Float – amount of time an activity may be delayed before it moves the
project’s critical path

Free Float – amount of time an activity may be delayed before


impacting early start of any subsequent activity

Communication Channels
N ( N – 1 ) / 2 ; Where N = the number of people in your team

Point of Total Assumption (PTA) The cost point beyond which the
Seller incurs all incremental costs, assuming 100% of the risk of cost
increases.
PTA = Target Cost + ((Ceiling Price – Target Price) / Buyer’s Share)
Remember: Cost + Profit = Price

Earned Value:
BAC = Total Budgeted for the project
PV= Planned % Complete X BAC
EV= Actual % Complete X BAC
AC= Sum of the actual costs
CV= EV – AC (From ‘C’ to shining ‘C’)
CPI= EV / AC (For a given period of time)
CPIC= EVC / ACC (From beginning to a point in time)
SV= EV – PV
SPI= EV / PV
EAC= BAC / CPIC (always use cumulative values for forecasting)
ETC= EAC – ACC
VAC= BAC - EAC

Copyright © 2007 Velociteach. All rights reserved.

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