Formulas

Question 1

What is Net Present Value (NPV) used for?

Answer 1

NPV is used for project selection. Always select the project with the highest NPV.

Question 3

How is Net Present Value (NPV) calculated?

Answer 3

NPV = Year 0 Initial Investment + [Cash Flow 1 / (1 + Discount Rate) ^1] + [Cash Flow 2 / (1 + Discount Rate) ^2] + [Cash Flow 3 / (1 + Discount Rate) ^3] …

Question 5

What is the formula for PERT (Program Evaluation and Review Technique) using Triangular Distribution?

Answer 5

PERT = (Optimistic + Most Likely + Pessimistic) / 3

Question 7

What is the formula for PERT using Beta Distribution?

Answer 7

PERT = (Optimistic + (4 × Most Likely) + Pessimistic) / 6

Question 9

How do you calculate Standard Deviation in PERT?

Answer 9

Standard Deviation (SD) = (Pessimistic - Optimistic) / 6

Question 11

What is the formula for Risk Rating in qualitative risk analysis?

Answer 11

Risk Rating = Probability × Impact (Expressed as a percentage or decimal)

Question 13

How is Expected Monetary Value (EMV) calculated?

Answer 13

EMV = Probability × Impact (Expressed as a dollar amount)

Question 15

How do you calculate the number of communication channels?

Answer 15

Communication Channels = n(n-1)/2, where n = number of team members.

Question 17

How is the Make or Buy Analysis equation structured?

Answer 17

Cost to Make = Cost to Buy (Lease). Solve for X (breakeven point): Initial Cost + (Daily Cost × X) = Cost to Lease + (Daily Lease Cost × X).

Question 19

What is the formula for calculating Float?

Answer 19

Float = Late Start - Early Start, or Float = Late Finish - Early Finish.

Question 21

How is Planned Value (PV) calculated?

Answer 21

PV = Budget at Completion (BAC) × Percent of Time Passed.

Question 23

How is Earned Value (EV) calculated?

Answer 23

EV = Budget at Completion (BAC) × Percent of Work Completed.

Question 25

What is Actual Cost (AC)?

Answer 25

The amount of money spent on approved project work to date. AC may also be given as AC = BAC - Money Left.

Question 27

How is Schedule Variance (SV) calculated?

Answer 27

SV = Earned Value (EV) - Planned Value (PV).

Question 29

How is Schedule Performance Index (SPI) calculated?

Answer 29

SPI = Earned Value (EV) / Planned Value (PV).

Question 31

How is Cost Variance (CV) calculated?

Answer 31

CV = Earned Value (EV) - Actual Cost (AC).

Question 33

How is Cost Performance Index (CPI) calculated?

Answer 33

CPI = Earned Value (EV) / Actual Cost (AC).

Question 35

What are the four different formulas for Estimate at Completion (EAC)?

Question 37

EAC = BAC / CPI (Assumes same rate of spending continues)

Question 39

EAC = AC + (BAC - EV) or EAC = BAC - CV (Assumes one-time deviation)

Question 41

EAC = AC + [(BAC - EV) / (CPI × SPI)] (For poor cost performance and firm deadline)

Question 43

EAC = AC + Estimate to Complete (ETC) (For flawed original budget)

Question 45

How is Estimate to Complete (ETC) calculated?

Answer 45

ETC = Estimate at Completion (EAC) - Actual Cost (AC).

Question 47

What is the formula for To Complete Performance Index (TCPI)?

Question 49

TCPI = (BAC - EV) / (BAC - AC) (if using original budget)

Question 51

TCPI = (BAC - EV) / (EAC - AC) (if budget is rebaselined)

Question 53

How is Variance at Completion (VAC) calculated?

Answer 53

VAC = Budget at Completion (BAC) - Estimate at Completion (EAC).

Question 55

What is the formula for Burn Rate?

Answer 55

Burn Rate = 1 / Cost Performance Index (CPI). A burn rate <1 means under budget, while >1 means over budget.