Project Management Articles
PMP Mathematics – Quick Book
Integration Management
Cash-Flow Analysis Techniques
Project Selection Criteria
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What is it
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Selection Mechanism
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Payback Period
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Period of time required to recoup the funds expended in an investment, or to reach the break-even point.
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Select Lowest
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Internal Rate of Return (IRR):
Think bank Interest rate
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Internal portfolio rate at which the investment will produce results.
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Select Highest
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Net Present Value:
Money now is more valuable than money later on.
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Formula:
PV = FV/(1 + r)t
Where
r =interest rate
PV – Present Value
FV = Future Value
t = Time period
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Select Highest
Remember the Formula!!
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ROI
Return on Investment
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Divide net profit by total assets
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Select Highest
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Benefit Cost Ratio
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Benefit / Cost
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Select Highest
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Cost Management
Rough Order of Magnitude estimate (ROM) = -25% to +75%
Definitive estimate = -5% to +10%
Earned Value Management Formulas:
Name
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Formula
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What is it?
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Interpretation
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BAC
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Budget at Completion
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No formula
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Approved Budget
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PV
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Planned Value
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PV = BAC* Planned % Complete
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What your schedule says you should have spent
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EV
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Earned Value
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EV = BAC * Actual% Complete
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How much of the project’s value you’ve really earned
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AC
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Actual Cost
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No Formula
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Spending on the projects – actual
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SPI
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Schedule Performance Index
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SPI = EV/PV
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Whether you’re behind or ahead of schedule
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SPI >1 – Ahead of Schedule
SPI = 1 – As per Schedule
SPI < 1 – Behind Schedule
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SV
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Schedule Variance
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SV = EV-PV
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How much ahead or behind schedule you are
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CPI
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Cost Performance Index
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CPI = EV/ AC
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Whether you’re within your budget or not
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CPI >1 – Under Planned Budget
CPI = 1 – On Budget
CPI < 1 – Over Planned Budget
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CV
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Cost Variance
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CV = EV – AC
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How much above or below your budget you are
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EAC
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Estimate at Completion
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EAC = BAC/CPI
Mostly Used
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The expected total cost of completing all work.
If the CPI is expected to be the same
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EAC
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Estimate at Completion
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EAC=AC+BAC–EV
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If future work will be accomplished at the planned rate
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ETC
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ETC = EAC – AC
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The expected cost to finish remaining work
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TCPI
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To Complete performance Index
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TCPI=(BAC-EV)/(BAC-AC)
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The run rate required to win the match
(Run rate = spending rate)
(Target Runs = Approved Budget)
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Three-Point Estimates:
PERT Analysis Also called BETA Distribution
Mean = (P + M + O)/3
Triangular Distribution Also called Average Distribution
Mean = (P + 4M + O)/ 6
Quality Management
1 Sigma = 68.26%
2 Sigma = 95.46%
3 Sigma = 99.73%
6 Sigma = 99.99%
Pareto Rule = 80/20
Communication Management:
Communication channels = n * (n-1)/2
Where n is the number of stakeholders
Procurement Management
Make or Buy Decision:
Make or Buy Decision: Select decision which result in lower cost or lower risks.
