 ## PMP Formulas - PMBOK 6th Edition

Here are 27 PMP formulas that are required for the PMP Examination.
There are 13 Earned Value Analysis formulas, 7 financial measures formulas and 7 additional formulas.

Abbreviation Name Explanation Equation Earned Value Analysis (PMBOK 6th edition, 7.4, p. 267) Abbreviation Name Lexicon Definition How Used Equation Interpretation of Result PV Planned Value The authorized budget assigned to scheduled work. The value of the work planned to be completed to a point in time, usually the data date, or project completion EV Earned value The measure of work performed expressed in terms of the budget authorized for that work. The planned value of all the work completed (earned) to a point in time, usually the data date, without reference to actual costs. EV = sum of the planned value of completed work AC Actual Cost The realized cost incurred for the work performed on an activity during a specific time period. The actual cost of all the work completed to a point in time, usually the data date. BAC Budget At Completion The sum of all budgets established for the work to be performed. The value of total planned work, the project cost baseline. CV Cost Variance The amount of budget deficit or surplus at a given point in time, expressed as the difference between the earned value and the actual cost. The difference between the work completed to a point in time, usually the data date, and the work planned to be completed to the same point in time. CV = EV - AC Positive - Under planned costNeutral - On planned cost Negative - Over planned cost SV Schedule Variance The amount by which the project is ahead or behind the planned delivery date, at a given point in time, expressed as the difference between the earned value and the planned value. The difference between the work completed to a point in time, usually the data date, and the work planned to be completed to the same point in time. SV = EV - PV Positive - Ahead of Schedule Neutral - On schedule Negative - Behind Schedule VAC Variance At Completion A projection of the amount of budget deficit or surplus, expressed as the difference between the budget at completion and the estimate at completion. The estimated difference in cost at the completion of the project. VAC = BAC - EAC Positive - Under planned cost Neutral - On planned cost Negative - Over planned cost CPI Cost Performance Index A measure of the cost efficiency of budgeted resources expressed as the ratio of earned value to actual cost. A CPI of 1.0 means the project is exactly on budget, that the work actually done so far is exactly the same asa the cost so far. Other values show the percentage of how much costs are over or under the budgeted amount for work accomplished. CPI = EV/AC Greater than 1.0 - Under planned costExactly 1.0 - On planned cost Less than 1.0 - Over planned cost SPI Schedule Performance Index A measure of schedule efficiency expressed as the ratio of earned value to planned value. An SPI of 1.0 means that the project is exactly on schedule, that the work actually done so far is exactly the same as the work planned to be done so far. other values show the percentage of how much costs are over or under the budgeted amount for work planned. SPI = EV/PV Greater than 1.0 - Ahead of scheduleExactly 1.0 - On scheduleLess than 1.0 - Behind schedule EAC Estimate At Completion The expected total cost of completing all work expressed as the sum of the actual cost to date and the estimate to complete. If the CPI is expected to be the same for the remainder of the project, EAC can be calculated using (a)If future work will be accomplished at the planned rate, use (b)If the initial plan is no longer valid, use: (c)If both the CPI and SPI influence the remaining work, use (d) (a) EAC = BAC/CPI(b)EAC = AC + BAC - EV(c)EAC = AC + Bottom-up ETC(d)EAC = AC + [(BAC - EV)/(CPI x SPI)] ETC Estimate To Complete The expected cost to finish all the remaining project work. Assuming work is proceeding on plan, the cost of completing the remaining authorized work can be calculated using (a)Reestimate the remaining work from the bottom up.(b) (a)ETC = EAC - AC(b)ETC = Reestimate TCPI To Complete Performance Index A measure of the cost performance that must be achieved with the remaining resources in order to meet a specified management goal, expressed as the ratio of the cost to finish the outstading work to the budget available. The efficiency that must be maintained in order to complete on plan. (a)The efficiency that must be maintained in order to complete the current EAC.(b) (a)TCPI = (BAC-EV)/(BAC-AC)(b)TCPI = (BAC-EV)/(EAC - AC) (a)Greater than 1.0 = Harder to completeExactly 1.0 = Same to completeLess than 1.0 = Easier to complete(b)Greater than 1.0 = Harder to completeExactly 1.0 = Same to completeLess than 1.0 = Easier to complete Financial measures (PMBOK 6th edition, 1.2, p. 34) NPV Net Present Value NPV is Present Value FV is Future Value r is the interest rate (as a decimal, so 0.05, not 5%) n is the number of years NPV = FV / (1+r)n-Initial Investment NPV (Even Cashflows) Net Present Value (Even Cashflows) ** This formula is probably beyond what one would be expected to see for the PMP Exam C is the net cash inflow expected to be received each period r is the required rate of return per period (or interest rate over the period) n are the number of periods during which the project is expected to operate and generate cash inflows NPV = C x ((1 - (1 + r)-n)/ r ) - Initial Investment NPV (Uneven Cashflows) Net Present Value (Uneven Cashflows) ** This formula is probably beyond what one would be expected to see for the PMP Exam r is the target rate of return per period (or interest rate per period); C1 is the net cash inflow during the first period; C2 is the net cash inflow during the second period; C3 is the net cash inflow during the third period, and so on.... NPV = C1 / (1 + r)1 + C2 / (1 + r)2 + C3 / (1 + r)3 + ... -Initial Investment ROI Return on Investment Return on Investment = Net profit / Capital Invested ROI > 1 - Project is profitable ROI = 1 - Project breaks even ROI < 1 - Project loses money IRR Internal rate of return IRR is the interest rate at which the cash inflow and cash outflow of the project equals zero**This will not be asked of you to calculate on the exam for obvious reasons. Essentially, the calculation would look at reversing which of the 3 NPV formulas above apply to the situation at hand and setting NPV to 0 and then find r(or IRR). The larger the Internal Rate of Return (IRR), the more favorable the project is financially to the organization. PBP Payback Period PBP = Total Investment / Cash inflow (per period(months/years)) The shorter the Payback Period, the more favourable the project financially to the organization BCR Benefit-cost ratio BCR = Benefits / Costs BCR > 1 - the project is profitable, higher the BCR the better BCR = 1 - the project will break even BCR < 1 - the project will lose money Additional formulas Number of potential communication channels or paths n x (n-1) /2 where n = number of stakeholders (PMBOK 6th edition, 10.1, p. 370) Three-point estimating(Triangular distribution) cE = (cO + cM +cP) / 3 Most likely (cM). This estimate is the most likely caseOptimistic (cO). Best-case scenarioPessimistic (cP). Worst-case scenario Triangular distribution is used when there is insufficient historical data or when using judgmental data. (PMBOK 6th edition, 6.4, p. 201(Schedule),PMBOK 6th edition, 7.2, p. 245(Cost) Three-point estimating(Beta Distribution or PERT) PERT (Program Evaluation and Review Technique) cE = (cO + 4cM + cP) / 6 Most likely (cM). This estimate is the most likely caseOptimistic (cO). Best-case scenarioPessimistic (cP). Worst-case scenario (PMBOK 6th edition, 7.2, p. 245) Standard Deviation (P - O) / 6 P = Pessimistic Estimate O = Optimistic Estimate Float/Slack Float/Slack = LS - ESFloat/Slack = LF - EF LS = Late startES = Early startLF = Late finishEF = Early finish Positive - Ahead of scheduleZero - On scheduleNegative - Behind schedule(PMBOK 6th edition, 6.5, p. 210) Expected Monetary Value (EMV) EMV = P x I P = Probability I = Impact Decision Tree Analysis(PMBOK 6th edition, 11.4, p. 435) Point of Total Assumption(PTA)PTA is the point on the cost line where seller effectively bears all the costs of a cost overrun PTA = (Ceiling price - Target Price)/Buyer's share ratio + Target Cost Relates only to Fixed Price Incentive Fee(FPIF) contractsAdditionally, Target Price is usually the sum of Target Cost and Target Profit(Fee) https://en.wikipedia.org/wiki/Point_of_total_assumption

References:
PMI. (2017, September) PMBOK® Guide - Sixth Edition + Agile Practice Guide. New Town Square, Pennsylvania: Project Management Institute, Inc.