PMP Formulas

Question 1

AC (Actual Cost)

Answer 1

ACWP (Actual Cost of Work Performed)

Question 2

Definitive Estimate?

Answer 2

-5% to +10%

Question 3

Variance (= s2))?

Answer 3

Variance = ((P-O)/6)^2

Question 4

Internal Rate of Return (IRR)?

Answer 4

Net Investment / Avg. Annual Cash Flow.

Higher is better. Also called Hurdle Rate

Question 5

Expected Monetary Value?

Answer 5

Probability * Impact

Question 6

Schedule Performance Index (SPI)?

Answer 6

SPI = EV / PV

Less than 1 is behind schedule

Question 7

Budget Estimate?

Answer 7

-10% to +25%

Question 8

Communication Channel?

Answer 8

n(n-1)/2

Question 9

Working Capital?

Answer 9

Current Assets - Current Liabilities

Question 10

% Communication of a PM?

Answer 10

90%

Question 11

Benefit Cost Ratio?

Answer 11

Benefit / Cost
(Higher is better, >1 has benefit)
Exam can call it Cost-Benefit Ratio, where lower is better.

Question 12

PERT Mean Estimate?

Answer 12

PERT=(P+4m+O)/6
3 estimates for each task:
. P: Pessimistic
. M: Most Likely
. O: Optimistic

Question 13

Return on Assets (ROA)?

Answer 13

NEBT / Total Assets
OR
NEAT / Totals Assets

Question 14

Sigma (o)?

Answer 14

1o = 68.27%
2o = 95.45%
3o = 99.73%
6o = 99.99985%

Question 15

Rough Order of Magnitude (ROM)?

Answer 15

-25% to +75%

-50 to +100%

Question 16

Arrow Diagramming Method (ADM)?

Answer 16

Also called Activity on Arrow (AOA)
Only 1 relationship: F-S
Can have “dummies”
Can analyze using either Three-Point Estimates or CPM

Question 17

Scheduled Variance (SV)?

Answer 17

SV = EV - PV

Minus is behind schedule

Question 18

GERT?

Answer 18

Allows loops and repetitive activities

Question 19

Expected Monetary Value?

Answer 19

Probability * Impact

Question 20

Variance at Completion (VAR)?

Answer 20

VAC = BAC - EAC

Question 21

Budgeted Estimate?

Answer 21

-10% to +25%

Question 22

To Complete Performance Index (TCPI)?

Answer 22

TCPI = (BAC - EV) / (BAC - AC)
Values for the TCPI index of less then 1.0 is good because it indicates the efficiency to complete as less than planned. How efficient must the project team be to complete the remaining work with the remaining money.

Question 23

ROI (Return on Investment)?

Answer 23

ROI = Earnings

Investment / Higher ROI is better

Question 24

Payback period?

Answer 24

Time to recover cost of the project.

Lower payback period is better.

Question 25

Cost Variance (CV)?

Answer 25

CV = EV - AC | Minus is over budget.

Question 26

Point of Total Assumption (PTA)?

Answer 26

((Ceiling Price - Target Price)/buyer's Share Ratio) + Target Cost

Question 27

Standard Deviation (=s)?

Answer 27

``` Deviation = (P-O)/6 3 estimates for each task: P: Pessimistic M: Most Likely O: Optimistic ```

Question 28

Estimate at Completion (EAC)?

Answer 28

``` EAC = BAC/CPI Same rate of spending. EAC = AC+ETC Use when Initial Estimates are flawed EAC = AC+(BAC-EV) Use when future variances are atypical. EAC = AC +[(BAC-EV)/CPI] Use when future variances are typical. ```

Question 29

Present Value?

Answer 29

``` PV=FV/{1+R]^n Higher is better. FV=Future Value R=Interest Rate n=number of time periods ```

Question 30

Discounted Cash Flow?

Answer 30

Cash Flow X Discount Factor

Question 31

Return on Sales (ROS)?

Answer 31

Net Income Before Taxes (NEBT)/Total Sales OR Net Income After Taxes (NEAT)/Total Sales

Question 32

Contract Related Formulas?

Answer 32

Savings = Target Cost - Actual Cost Bonus = Savings * Percentage Contract Cost = Bonus + Fees Total Cost = Actual Cost + Contract Cost

Question 33

Working Capital?

Answer 33

Current Assets - Current Liabilities

Question 34

Cash Flow?

Answer 34

Cash Flow = Cash In - Cash Out

Question 35

Slack or Float?

Answer 35

``` LS - ES: Calculates slack with forward pass 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. LF - EF: Calculates slack with backwards pass. Free Float Slack is the amount of time an activity can be delayed without its successor (following activity). ```

Question 36

Cost Performance Index (CPI)?

Answer 36

CPI = EV / AC | Less than 1 is over budget

Question 37

Precedence Diagramming Method (PDM)?

Answer 37

Also called Activity on Node (AON): Activities are in the boxes, arrows show the relationship. Most commonly used today. Has 4 relationships: F-S, S-S, F-F, S-F No "dummies" (zero duration dependencies) allowed. Can analyze using either Three-Point Estimates or CPM

Question 38

PV (Planned Value)?

Answer 38

BCWS (Budgeted Cost of Work Scheduled)