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.