Key Concepts and Formulas for PMP Exam

Key Concept and Formulas for PMP Exam

Project Selection
Earn Value Formulas
Financials
NPV (Net Present Value) =
FV/(1+r)n
FV= Future Value, r= interest
rate, n= no. of time periods
Higher NPV is better
PV (Planned Value) = BCWS (Budgeted Cost of Work Scheduled IRR (Internal Rate of Return)
EV (Earned Value) = BCWP (Budgeted Cost of Work Performed) = Solve the NPV equation for
AC (Actual Cost) = ACWP (Actual Cost of Work Performed) r
SV = EV PV (minus is behind schedule) Also called Hurdle Rate
CV = EV AC (minus is over budget) Higher IRR percentage is
SPI = EV/PV (Less than 1 is behind schedule) better
CPI = EV/AC (Less than 1 is over budget) BCR (Benefit/Cost Ratio)
EAC = AC + (BAC-EV) Use when variances are atypical Higher BCR is better.
EAC = AC + [(BAC-EV)/CPI] Use when variances are typical Beware, exam can call it CBR,
(Note: This is the same as EAC = BAC/CPI) where lower is better
VAC = BAC EAC ROI (Return on Investment) =
ETC = BAC EV Use when variances are atypical Earnings/Investment
ETC = (BAC EV)/CPI Use when variances are typical Higher ROI is better
ETC = EAC AC Use when original estimates were flawed Payback Period = Time to
recover cost of the project
Lower payback period is
better
Cash Flow = Cash In Cash
Out
Network Diagram Calculating Stackor Float

Precedence Diagramming Method (PDM) Total Float (also called Slack,

Also called Activity on Node (AON): Activities are in
boxes
Most commonly used today
Has 4 relationships: F-S, S-S, F-F, S-F
No dummies (zero duration dependencies) allowed
Can analyze using either Three-Point Estimates or CPM
Arrow Diagramming Method (ADM)
Float, or Project Float) is the
total amount of time an
activity can be delayed
without delaying the project
finish date.
Free Float/Slack is the amount
of time an activity can be
delayed without delaying its
successor (following activity).

Also called Activity on Arrow (AOA) LS ES: Calculates

Only 1 relationship: F-S slack with forward
Can have dummies pass

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 Key Concepts and Formulas for PMP Exam

Can analyze using either Three-Point Estimates or CPM LF EF: Calculates

slack with backwards
Graphical Evaluation and Review Technique (GERT) pass

Allows loops and repetitive activities Lag Time: Inserted wait time
between activities

Lead Time: Overlapping

activities, also called
paralleling or fast tracking.

Lead In; Lag Out

Three Point Estimates, or PERT Accuracy of Estimates

PERT = PROGRAM Evaluation and Review Technique Order of Magnitude:-25% to

Holds schedule and lets cost float +75%
3 estimates for each task: Optimistic, Pessimistic, and Most Budget Estimate:-10% to
Likely +25%
Mean Estimate = (O + 4*ML + P)/6 Definitive Estimate:-5% to
Standard Deviation (s) = (P O)/6 +10%
Variance = s2 , or [(P O)/6]2
Standard deviation of tasks on CP = Sum of variances

Conflict Resolution
Powers of a Project Manager
(Best to Worst)
1.Problem Solving: Also
called Confronting
2. Compromising: Solutions
1. Expert: Best, earned on your own
satisfy both parties
2. Reward: Next best. Based on PM position
3. Withdrawal: Postponing a
3. Formal: Power, based on PM position
decision
4. Referent: Referring to positions of others
4. Smoothing: Emphasis on
5. Penalty: Worst. Based on PM position
agreement
5. Forcing: One viewpoint at
expense of another.
Sources of Conflict (Order of Priority) Herzbergs Motivators
1. Schedules 1. Achievement
2. Project Priorities 2. Recognition
3. Resources 3. Challenge of the work
4. Technical Opinions itself
5. Administrative Procedures 4. Responsibility
6. Cost 5. Advancement
7. Personality 6. Growth

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 Key Concepts and Formulas for PMP Exam

Channels of Communication Closing

Between Team Members = N(N-1)/2 Project is closed when
administrative closure is
complete.
Administrative closure is
done at end of each Project
Phase and at the end of the
Project.
Contract closure: verification
that deliverables were
acceptable; it is done once
at the end of the contract.
Contract Closure Procedure
is produced under Close
Project

si
Using CV and SV to Analyze Project Risk Then
If CV = 0 and SV = 0 The project is on budget
and on schedule

If CV is Positive (+ve) and SV is Negative (-ve) The project is under budget

and behind schedule; the
task has not started, or it
has started and not enough
resources have been applied

If CV is Negative and SV is Negative The project is over budget

and behind schedule

If CV is Negative and SV is Positive The Project is over budget

but ahead of schedule

If CV is Positive and SV is Positive The Project is under budget

and ahead of schedule.

C2DI Inc. 2015