PMP Key Concept and Formulas

Key Concept and Formulas for PMP Exam
Earn Value Formulas	Project Selection Financials
PV (Planned Value) = BCWS (Budgeted Cost of Work Scheduled EV (Earned Value) = BCWP (Budgeted Cost of Work Performed) AC (Actual Cost) = ACWP (Actual Cost of Work Performed) SV = EV – PV (minus is behind schedule) CV = EV – AC (minus is over budget) SPI = EV/PV (Less than 1 is behind schedule) CPI = EV/AC (Less than 1 is over budget) EAC = AC + (BAC-EV) Use when variances are atypical EAC = AC + [(BAC-EV)/CPI] Use when variances are typical (Note: This is the same as EAC = BAC/CPI) VAC = BAC – EAC ETC = BAC – EV Use when variances are atypical ETC = (BAC – EV)/CPI Use when variances are typical ETC = EAC – AC Use when original estimates were flawed	NPV (Net Present Value) = FV/(1+r)n FV= Future Value, r= interest rate, n= no. of time periods Higher NPV is better IRR (Internal Rate of Return) = Solve the NPV equation for “r” Also called Hurdle Rate Higher IRR percentage is better BCR (Benefit/Cost Ratio) Higher BCR is better. Beware, exam can call it CBR, where lower is better ROI (Return on Investment) = Earnings/Investment Higher ROI is better 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) 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) Also called Activity on Arrow (AOA) Only 1 relationship: F-S Can have “dummies” Can analyze using either Three-Point Estimates or CPM Graphical Evaluation and Review Technique (GERT) Allows loops and repetitive activities	Total Float (also called Slack, 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). LS – ES: Calculates slack with forward pass LF – EF: Calculates slack with backwards pass 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 Holds schedule and lets cost float 3 estimates for each task: Optimistic, Pessimistic, and Most Likely Mean Estimate = (O + 4*ML + P)/6 Standard Deviation (s) = (P – O)/6 Variance = s2 , or [(P – O)/6]2 Standard deviation of tasks on CP = Sum of variances	Order of Magnitude:-25% to +75% Budget Estimate:-10% to +25% Definitive Estimate:-5% to +10%

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