PM Notebook - Appendix H - Formula Sheet

PM Notebook
Summarizing Project Management Concepts for the PMP
Exam
Mohammad Elsheimy Road to PMP

PM NOTEBOOK APPENDIX H – FORMULA SHEET | PROJECT SELECTION METHODS
DISCLAIMER: THE MATERIAL INCLUDED IN THIS DOCUMENT IS BASED ON DATA / INFORMATION
GATHERED FROM VARIOUS RELIABLE SOURCES. NONE OF THIS DATA / INFORMATION IS A PROPERTY
OF THE AUTHOR.
1
DISCLAIMER: THE MATERIAL INCLUDED IN THIS DOCUMENT IS
BASED ON DATA/INFORMATION GATHERED FROM VARIOUS
RELIABLE SOURCES. NONE OF THIS DATA/INFORMATION IS A
PROPERTY OF THE AUTHOR. NONE IS INTENDED TO MAKE A
PROFIT IN ANY WAY. THIS IS FOR PERSONAL USE ONLY.

OF THE AUTHOR.
2
No great man ever complains of want of opportunity.
Ralph Waldo Emerson

OF THE AUTHOR.
3
Table of Contents
Appendix H – Formula Sheet ................................................................................................................................. 4
Project Selection Methods ................................................................................................................................. 4
Depreciation ..................................................................................................................................................... 4
Planned Value .................................................................................................................................................. 4
Other Methods.................................................................................................................................................. 5
Schedule Management ..................................................................................................................................... 5
Cost Management .............................................................................................................................................. 5
Earned Value Management (EVM).............................................................................................................. 5
Communication ................................................................................................................................................... 8
Risk Management ................................................................................................................................................ 8
Procurements........................................................................................................................................................ 8
Estimates ................................................................................................................................................................ 9

OF THE AUTHOR.
4
Project Selection Methods
Depreciation
Straight Line
Depreciation
The same amount of
depreciation is taken each
year.
Amt =
total
year count
Double Declining
Balance
Percentage is double the
straight line depreciation
Sum of Years Digits
(SYD)
𝑺𝒀𝑫 =
𝒏 (𝒏 + 𝟏)
𝟐
= 𝟓𝒚𝒆𝒂𝒓𝒔 =
𝟓(𝟓 + 𝟏)
𝟐
= 𝟏𝟓
𝑬𝒙𝒑𝒆𝒏𝒔𝒆 =
𝑹𝒆𝒎𝒂𝒊𝒏𝒊𝒏𝒈 𝒍𝒊𝒇𝒆
𝒔𝒖𝒎 𝒐𝒇 𝒚𝒆𝒂𝒓𝒔 𝒅𝒊𝒈𝒊𝒕
∗ 𝑫𝒆𝒑𝒓𝒆𝒄𝒊𝒂𝒃𝒍𝒆 𝑪𝒐𝒔𝒕
Planned Value
Future Value (FV) To determine the future
value of present money.
𝑭𝑽 = 𝑷𝑽 (𝟏 + 𝒊) 𝒏
PV = Present value
i = interest rate
n = number of periods
Present Value (PV) The current worth of a
future sum of money given
a specific rate of return.
𝑷𝑽 =
𝑭𝑽
(𝟏 + 𝒊) 𝒏
FV = Future value
i = interest rate
n = number of periods
Net Present Value
(NPV) / Net Present
Worth (NPW)
The difference between
the project’s current value
of cash inflow and the
current value of cash
outflow over many time
periods. The NPV must
always be positive. When
picking a project, one with
a higher NPV is preferred.
𝑵𝑷𝑽 = −𝑪 𝟎 + ∑
𝑪𝒕
(𝟏 + 𝒓) 𝒕
𝑻
𝒕=𝟏
Simplified –
𝑵𝑷𝑽 = −𝑪 𝟎 +
𝑪 𝟏
𝟏 + 𝒓
+
𝑪 𝟐
(𝟏 + 𝒓) 𝟐
+ ⋯ +
𝑪 𝑻
(𝟏 + 𝒓) 𝑻
-C0 = Initial investment
C = Future cash flow

PM NOTEBOOK APPENDIX H – FORMULA SHEET | SCHEDULE MANAGEMENT
OF THE AUTHOR.
5
r = Interest rate
T = Time period
Other Methods
Return on Investment
(ROI)
Measures the gain or loss
generated on an
investment relative to the
amount of money
invested. ROI is usually
expressed as a
percentage and is
typically used for personal
financial decisions, to
compare a company's
profitability or to compare
the efficiency of different
investments.
𝑹𝑶𝑰 =
𝑵𝒆𝒕 𝑷𝒓𝒐𝒇𝒊𝒕 (𝑹𝒆𝒕𝒖𝒓𝒏)
𝑰𝒏𝒗𝒆𝒔𝒕𝒎𝒆𝒏𝒕 (𝑪𝒐𝒔𝒕)
Schedule Management
Crashing Slope The cost per day of
crashing the project.
𝑪𝒓𝒂𝒔𝒉 𝑪𝒐𝒔𝒕 (𝑪𝑪) − 𝑵𝒐𝒓𝒎𝒂𝒍 𝑪𝒐𝒔𝒕 (𝑵𝑪)
𝑵𝒐𝒓𝒎𝒂𝒍 𝑫𝒖𝒓𝒂𝒕𝒊𝒐𝒏 (𝑵𝑫) − 𝑪𝒓𝒂𝒔𝒉 𝑫𝒖𝒓𝒂𝒕𝒊𝒐𝒏 (𝑪𝑫)
Cost Management
Earned Value Management (EVM)
BAC (Budget at
Completion)
Total project budget.
Planned % Complete How much percentage of
the work you should have
done according to
schedule.
Actual % Complete How much percentage of
the work you have
actually done.
PV (Planned Value) /
BCWS (Budgeted
Cost for Work
Scheduled).
The budgeted value of the
work completed.
PV = BAC ∗ Plan % Compl

PM NOTEBOOK APPENDIX H – FORMULA SHEET | COST MANAGEMENT
OF THE AUTHOR.
6
EV (Earned Value) /
BCWP (Budgeted
Cost for Work
Performed).
The actual value of the
work completed.
EV = BAC ∗ Actual % Compl
EV = CV + AC
EV = SV + PV
EV = CPI ∗ AC
EV = SPI ∗ PV
AC (Actual Cost) /
ACWP (Actual Cost
for Work Performed)
Total expenditure (money
spent) for the work.
SPI (Schedule
Performance Index)
Ratio reflects whether the
project work is ahead of (>
1.0) / on / behind (< 1.0)
schedule. Cumulative.
SPI = EV / PV
SV (Schedule
Variance)
How much time ahead of
(positive) / behind
(negative) schedule.
SV = EV – PV
CPI (Cost
Performance Index)
Ratio reflects whether the
project work is over (< 1.0)
of / on / under budget (>
1.0). Cumulative. It
measures how much
dollars you get for each
dollar spent.
Researchers have found
that the cumulative CPI
does not change by more
than 10% once a project is
approximately 20%
complete.
CPI = EV / AC
CV (Cost Variance) How much $ under
(positive) / over (negative)
budget.
CV = EV – AC

PM NOTEBOOK APPENDIX H – FORMULA SHEET | COST MANAGEMENT
OF THE AUTHOR.
7
EAC (Estimate at
Completion)
Estimates the planned cost
at project finish.
If no variances or you will continue at the
same rate of spending (when current
variances are seen as regular/typical of the
future) –
𝑬𝑨𝑪 = 𝑩𝑨𝑪 / 𝑪𝑷𝑰
Original rate calculation. I.e. when variances
are irregular/atypical (when there are
variances but the rest of the project will
continue at the normal behavior) –
𝑬𝑨𝑪 = 𝑨𝑪 + ( 𝑩𝑨𝑪 – 𝑬𝑽)
Or
𝑬𝑨𝑪 = 𝑩𝑨𝑪 − 𝑪𝑽
Considering SPI and CPI (when variances are
regular/typical) –
𝑬𝑨𝑪 = 𝑨𝑪 +
(𝑩𝑨𝑪 − 𝑬𝑽)
(𝑺𝑷𝑰 ∗ 𝑪𝑷𝑰)
New rate or the original rate was
fundamentally flawed –
EAC = AC + New Estimate
ETC (Estimate to
Complete)
Estimates the additional
cost needed for the
project finish.
ETC = EAC – AC
VAC (Variance at
Completion)
Estimates the difference
between EAC and original
planned value.
VAC = BAC – EAC
TCPI (To-Complete
Performance Index)
Ratio estimates efficiency
needed to finish the
project on budget.
Higher value means
stricter cost management.
Budget-based (when we need project to get
back to budget) –
𝑻𝑪𝑷𝑰 =
(𝑩𝑨𝑪 − 𝑨𝑪)
Estimation-based (to meet the new estimate)
–

PM NOTEBOOK APPENDIX H – FORMULA SHEET | COMMUNICATION
OF THE AUTHOR.
8
𝑻𝑪𝑷𝑰 =
(𝑬𝑨𝑪 − 𝑨𝑪)
Project Variance The final variance, which is
discovered only at the
project’s completion.
𝑽𝑨𝑹 = 𝑩𝑨𝑪 − 𝑨𝑪
Communication
Lines/Channels of
Communication
# Lines for n People =
n ∗ (n − 1)
2
Risk Management
Expected Monetary
Value (EMV)
EVM lets you examine
costs of all the paths you
might take through the
project and assign
monetary value to each
decision. Implies decision
tree analysis.
𝑬𝒙$𝑽 = ∑ 𝑽𝒊 𝑷𝒊
𝒏
𝒊=𝟏
Vi = The monetary value of event i.
Pi = Probability of occurrence of event i.
Procurements
Make-or-Buy
Analysis
The following formula can
be used to get how long
will it take for the lease
cost to be the same as the
purchase cost.
𝒎𝒐𝒏𝒕𝒉 𝒄𝒐𝒖𝒏𝒕
= 𝒂𝒃𝒔(
𝒃𝒖𝒊𝒍𝒅 𝒄𝒐𝒔𝒕𝒔 − 𝒃𝒖𝒚 𝒄𝒐𝒔𝒕𝒔
𝒃𝒖𝒊𝒍𝒅 𝒎𝒕𝒉𝒍𝒚 𝒇𝒆𝒆𝒔 − 𝒃𝒖𝒚 𝒎𝒕𝒉𝒍𝒚 𝒇𝒆𝒆𝒔
)
Same formula can be represented in another
way –
𝒃𝒖𝒊𝒍𝒅 𝒎𝒕𝒉𝒍𝒚 𝒇𝒆𝒆𝒔 ∗ 𝒎𝒕𝒉 𝒄𝒏𝒕
= 𝒃𝒖𝒚 𝒄𝒐𝒔𝒕𝒔 + 𝒃𝒖𝒚 𝒎𝒕𝒉𝒍𝒚 𝒇𝒆𝒆𝒔
∗ 𝒎𝒕𝒉 𝒄𝒏𝒕
Point of Total
Assumption (PTA)
PTA is the point on the cost
line of profit-cost curve
determined by contract
elements associated with
a fixed price incentive
contract, above which the
seller effectively bears all
the costs of a cost overrun.
𝑷𝑻𝑨 =
(𝑪𝒆𝒊𝒍𝒊𝒏𝒈 𝑷𝒓𝒊𝒄𝒆 − 𝑻𝒂𝒓𝒈𝒆𝒕 𝑷𝒓𝒊𝒄𝒆)
𝑩𝒖𝒚𝒆𝒓′ 𝒔 𝑺𝒉𝒂𝒓𝒆 𝑹𝒂𝒕𝒊𝒐
+ 𝑻𝒂𝒓𝒈𝒆𝒕 𝑪𝒐𝒔𝒕

PM NOTEBOOK APPENDIX H – FORMULA SHEET | ESTIMATES
OF THE AUTHOR.
9
Estimates
Simple/Triangular
Distribution
ESA =
(O + P + M)
3
Beta/PERT Estimate
Σ =
(O + P + 4M)
6
Beta Standard
Deviation / Sigma
σ =
(P − O)
6
Beta Variance
VARPERT = σ2
= (
(P − O)
6
)
2

PM Notebook - Appendix H - Formula Sheet

More Related Content

What's hot (20)

Similar to PM Notebook - Appendix H - Formula Sheet (20)

More from Mohammad Elsheimy (18)

Recently uploaded (20)

PM Notebook - Appendix H - Formula Sheet