This document provides formulas and definitions for key project management concepts for the PMP exam. It includes formulas for project selection methods like net present value, cost management methods like earned value management, schedule management concepts, risk management like expected monetary value, and estimates. The document is a study guide intended to help readers learn and summarize important PM formulas and terms for exam preparation.
2. PM NOTEBOOK APPENDIX H โ 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.
3. PM NOTEBOOK APPENDIX H โ 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.
2
No great man ever complains of want of opportunity.
Ralph Waldo Emerson
4. PM NOTEBOOK APPENDIX H โ 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.
3
Table of Contents
Appendix H โ 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
5. PM NOTEBOOK APPENDIX H โ 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.
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)
๐บ๐๐ซ =
๐ (๐ + ๐)
๐
= ๐๐๐๐๐๐ =
๐(๐ + ๐)
๐
= ๐๐
๐ฌ๐๐๐๐๐๐ =
๐น๐๐๐๐๐๐๐๐ ๐๐๐๐
๐๐๐ ๐๐ ๐๐๐๐๐ ๐ ๐๐๐๐
โ ๐ซ๐๐๐๐๐๐๐๐๐๐ ๐ช๐๐๐
Planned Value
Future Value (FV) To determine the future
value of present money.
๐ญ๐ฝ = ๐ท๐ฝ (๐ + ๐) ๐
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.
๐ท๐ฝ =
๐ญ๐ฝ
(๐ + ๐) ๐
FV = Future value
i = interest rate
n = number of periods
Net Present Value
(NPV) / Net Present
Worth (NPW)
The difference between
the projectโs 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.
๐ต๐ท๐ฝ = โ๐ช ๐ + โ
๐ช๐
(๐ + ๐) ๐
๐ป
๐=๐
Simplified โ
๐ต๐ท๐ฝ = โ๐ช ๐ +
๐ช ๐
๐ + ๐
+
๐ช ๐
(๐ + ๐) ๐
+ โฏ +
๐ช ๐ป
(๐ + ๐) ๐ป
-C0 = Initial investment
C = Future cash flow
6. PM NOTEBOOK APPENDIX H โ FORMULA SHEET | SCHEDULE MANAGEMENT
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.
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.
๐น๐ถ๐ฐ =
๐ต๐๐ ๐ท๐๐๐๐๐ (๐น๐๐๐๐๐)
๐ฐ๐๐๐๐๐๐๐๐๐ (๐ช๐๐๐)
Schedule Management
Crashing Slope The cost per day of
crashing the project.
๐ช๐๐๐๐ ๐ช๐๐๐ (๐ช๐ช) โ ๐ต๐๐๐๐๐ ๐ช๐๐๐ (๐ต๐ช)
๐ต๐๐๐๐๐ ๐ซ๐๐๐๐๐๐๐ (๐ต๐ซ) โ ๐ช๐๐๐๐ ๐ซ๐๐๐๐๐๐๐ (๐ช๐ซ)
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 โ Plan % Compl
7. PM NOTEBOOK APPENDIX H โ FORMULA SHEET | COST MANAGEMENT
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.
6
EV (Earned Value) /
BCWP (Budgeted
Cost for Work
Performed).
The actual value of the
work completed.
EV = BAC โ Actual % Compl
EV = CV + AC
EV = SV + PV
EV = CPI โ AC
EV = SPI โ 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 โ 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 โ AC
8. PM NOTEBOOK APPENDIX H โ FORMULA SHEET | COST MANAGEMENT
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.
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) โ
๐ฌ๐จ๐ช = ๐ฉ๐จ๐ช / ๐ช๐ท๐ฐ
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) โ
๐ฌ๐จ๐ช = ๐จ๐ช + ( ๐ฉ๐จ๐ช โ ๐ฌ๐ฝ)
Or
๐ฌ๐จ๐ช = ๐ฉ๐จ๐ช โ ๐ช๐ฝ
Considering SPI and CPI (when variances are
regular/typical) โ
๐ฌ๐จ๐ช = ๐จ๐ช +
(๐ฉ๐จ๐ช โ ๐ฌ๐ฝ)
(๐บ๐ท๐ฐ โ ๐ช๐ท๐ฐ)
New rate or the original rate was
fundamentally flawed โ
EAC = AC + New Estimate
ETC (Estimate to
Complete)
Estimates the additional
cost needed for the
project finish.
ETC = EAC โ AC
VAC (Variance at
Completion)
Estimates the difference
between EAC and original
planned value.
VAC = BAC โ 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) โ
๐ป๐ช๐ท๐ฐ =
(๐ฉ๐จ๐ช โ ๐ฌ๐ฝ)
(๐ฉ๐จ๐ช โ ๐จ๐ช)
Estimation-based (to meet the new estimate)
โ
9. PM NOTEBOOK APPENDIX H โ FORMULA SHEET | COMMUNICATION
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.
8
๐ป๐ช๐ท๐ฐ =
(๐ฉ๐จ๐ช โ ๐ฌ๐ฝ)
(๐ฌ๐จ๐ช โ ๐จ๐ช)
Project Variance The final variance, which is
discovered only at the
projectโs completion.
๐ฝ๐จ๐น = ๐ฉ๐จ๐ช โ ๐จ๐ช
Communication
Lines/Channels of
Communication
# Lines for n People =
n โ (n โ 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.
๐ฌ๐$๐ฝ = โ ๐ฝ๐ ๐ท๐
๐
๐=๐
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.
๐๐๐๐๐ ๐๐๐๐๐
= ๐๐๐(
๐๐๐๐๐ ๐๐๐๐๐ โ ๐๐๐ ๐๐๐๐๐
๐๐๐๐๐ ๐๐๐๐๐ ๐๐๐๐ โ ๐๐๐ ๐๐๐๐๐ ๐๐๐๐
)
Same formula can be represented in another
way โ
๐๐๐๐๐ ๐๐๐๐๐ ๐๐๐๐ โ ๐๐๐ ๐๐๐
= ๐๐๐ ๐๐๐๐๐ + ๐๐๐ ๐๐๐๐๐ ๐๐๐๐
โ ๐๐๐ ๐๐๐
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.
๐ท๐ป๐จ =
(๐ช๐๐๐๐๐๐ ๐ท๐๐๐๐ โ ๐ป๐๐๐๐๐ ๐ท๐๐๐๐)
๐ฉ๐๐๐๐โฒ ๐ ๐บ๐๐๐๐ ๐น๐๐๐๐
+ ๐ป๐๐๐๐๐ ๐ช๐๐๐
10. PM NOTEBOOK APPENDIX H โ FORMULA SHEET | ESTIMATES
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.
9
Estimates
Simple/Triangular
Distribution
ESA =
(O + P + M)
3
Beta/PERT Estimate
ฮฃ =
(O + P + 4M)
6
Beta Standard
Deviation / Sigma
ฯ =
(P โ O)
6
Beta Variance
VARPERT = ฯ2
= (
(P โ O)
6
)
2