PMP Mathematics – Quick Book

Integration Management

Cash-Flow Analysis Techniques

Project Selection Criteria

What is it

Selection Mechanism

Payback Period
Period of time required to recoup the funds expended in an investment, or to reach the break-even point.
Select Lowest
Internal Rate of Return (IRR):
Think bank Interest rate
Internal portfolio rate at which the investment will produce results.
Select Highest
Net Present Value: 
Money now is more valuable than money later on.
Formula:
PV = FV/(1 + r)t 
Where
r  =interest rate
PV – Present Value
FV = Future Value
t = Time period
Select Highest
Remember the Formula!!
ROI
Return on Investment
Divide net profit by total assets
Select Highest
Benefit Cost Ratio
Benefit / Cost
Select Highest

Cost Management

Rough Order of Magnitude estimate (ROM) = -25% to +75%
Definitive estimate = -5% to +10%

Earned Value Management Formulas:

Name

Formula

What is it?

Interpretation

BAC
Budget at Completion
No formula
Approved Budget
PV
Planned Value
PV = BAC* Planned % Complete
What your schedule says you should have spent
EV
Earned Value
EV = BAC * Actual% Complete
How much of the project’s value you’ve really earned
AC
Actual Cost
No Formula
Spending on the projects – actual
SPI
Schedule Performance Index
SPI = EV/PV
Whether you’re behind or ahead of schedule
SPI >1  – Ahead of Schedule
SPI = 1 – As per Schedule
SPI < 1 – Behind Schedule
SV
Schedule Variance
SV = EV-PV
How much ahead or behind schedule you are
CPI
Cost Performance Index
CPI = EV/ AC
Whether you’re within your budget or not
CPI >1  – Under Planned Budget
CPI = 1 – On Budget
CPI < 1 – Over Planned Budget
CV
Cost Variance
CV = EV – AC
How much above or below your budget you are
EAC
Estimate at Completion
EAC = BAC/CPI
Mostly Used
The expected total cost of completing all work.
If the CPI is expected to be the same
EAC
Estimate at Completion
EAC=AC+BAC–EV
If future work will be accomplished at the planned rate
ETC
ETC = EAC – AC
The expected cost to finish remaining work
TCPI
To Complete performance Index
TCPI=(BAC-EV)/(BAC-AC)
The run rate required to win the match
(Run rate = spending rate)
(Target Runs = Approved Budget)

 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.

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