PMI Exam Mathematical Formulas
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Project Management Formulas
File: 32570867.doc Page 1 of 2 Last Updated: April 30th, 2001 Financial Management
Revenue = Cost / (1 – Expected Margin) Accounting Equation is: Owner’s Equity = Assets - Liabilities
Gross Profit = Revenue - Cost
(Gross) Margin = Gross Profit / Revenue Markup = Revenue / Cost
Net Income = Gross Profit - Expense Net Earning Before Tax (NEBT) = Revenue – Cost - Expense
Net Income = Revenue – Cost - Expense
Earned Value Formulas:
Actual Cost (AC)
What is the actual amount spent on the project to date ? AC = Actual Cost
Earned Value (EV)
What has been completed and what is the estimated
value of those items ? EV = Earned Value
Plan Value (PV)
What did we plan to spend ? PV = Baseline, Scheduled or Planned Costs
Budget at Completion (BAC)
What is the project’s budget ? BAC = Total Budget Cost
Cost Variance (CV)
How far off are we from our scheduled cost of things to be
completed from the actual amount spent ? CV = EV – AC
If CV < 0 Over budget -CV
= 0 On budget
> 0 Under/Within budget +CV
Cost Performance Index (CPI)
(a.k.a.) Burn Rate
What is the efficiency at which tasks are getting done from
a financial point of view ? CPI = EV / AC
Cumulative CPI is relative stable
after 15% - 20% of project
completion. If CPI < 1 Over budget -CPI
= 1 On budget
> 1 Under/Within budget +CPI
Schedule Variance (SV)
How far off are we from our schedule from a financial
point of view ? SV = EV – PV
If SV < 0 Behind schedule -SV
= 0 On schedule
> 0 Ahead of schedule +SV
Schedule Performance Index (SPI)
How well is the project performing in comparison to how
well it is expected to perform ? SPI = EV / PV
If SPI < 1 Behind schedule -SPI
= 1 On schedule
> 1 Ahead of schedule +SPI
Variance at Completion (VAC)
What is the VAC = BAC - EAC
Estimate at Completion (EAC)
How much will the project cost at completion ? EAC = BAC / CPI
EAC = AC + (Remaining PV) / CPI
EAC = AC + ETC
EAC = AC + Remaining PV Where Remaining PV = BAC – EV
Estimated to Completion (ETC)
What is the estimate of additional funds needed to
complete the project ? ETC = EAC – AC
Calculated Estimate at Completion (CEAC)
How much will the project cost at completion CEAC = BAC / CPI
Percent Complete (PC)
How much of the project has been completed ? PC = PV / BAC
Percent Schedule (PS)
How much of the budget at completion you have used to
date ? PS = AC / BAC
To-Complete Performance Index (TCPI)
How efficient must the team be to complete the remaining
work with the remaining money ? TCPI = (BAC – EV) / ( BAC – AC)
Budget Estimate Accuracy Range: Order of Magnitude (-25% to 75%), Budget: (-10% to 25%), Definitive: (-5% to 10%) Project Management Formulas
File: 32570867.doc Page 2 of 2 Last Updated: April 30th, 2001
Profitability Measurement Formulas:
Benefit/Cost Ratio (BCR) BCR = PV(r) / PV(c)
Where PV(r) is Present Value of Revenue
PV(c) Is Present Value of Cost If BCR < 1 Project cost > benefits
= 1 Project cost = benefits
> 1 Project cost < benefits
Return of Sales (ROS) ROS = NEBT / Total Sales (Gross Profit)
ROS = NEAT / Total Sales (Net Profit)
Return on Assets (ROA) ROA = NEBT / Assets
Return on Investment (ROI) ROI = NEAT / Total Investment Cost
Present Value (PV) tr)(1MPV Where M = Amount of payment t years from now
r = Interest rate (or discount rate)
Future Value (FV) FV = PV *(1+r) t Where r Interest rate
t No. of periods over which interest in compounded
Net Present Value (NPV) NPV = Sum of Current Value of Future Cash Flow – Original Investment
If NPV of an investment is <= 0, there is no real profit coming out of the investment
> 0, it means that the rate of return from the project
more than offset reduction in the value of money
over a period of time.
Payback Period (PbP) Payback Period is no. of time periods up to the point where cumulative revenues exceed
cumulative cost.
PbP = Net Investment / Average Annual Cash Flow
Internal Rate of Return IRR IRR is a quantitative measure of a project’s expected profitability. The average rate of return
for the project, measured as a percentage return. IRR =
Expected Monetary Value EMV = Outcome * Probability
Working Capital (WC) WC = Current Assets – Current Liabilities
Communication
Communication Channels – Geometric Series Communication Channel = (N*(N-1))/2 where N is no. of people
Non-Verbal Communication Total Message Impact = Words (7%) + Vocal tones (35%) + Non-verbal (55%)
Communication Macro Barrier Entrophy: 23% - 27% of message is lost in upward communication:
PM Time Spend 70% - 90% of Project Manager spent time on communication
Of time spent: 45% is spent on listening
