Essential Formula Sheet

Essential PMP® Formulas __________________________________________________________

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

Smaller is Better: Opportunity Cost Payback Period

Return on Invested Capital (Project Selection – bigger is better) ROIC= Net Income After Tax ÷ Total Capital Invested (Project Selection – bigger is better) Economic Value Add 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) __________________________________________________________

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) EVC / ACC (From beginning to a point in time) CPIC= 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.