# 25 PMP Formulas you must remember to pass the PMP exam

 Purpose Formula Description Calculate Beta Value in PERT (Program Evaluation and Review Technique) Beta = (Pessimistic + 4 Most Likely + Optimistic) / 6 This equation finds the expected value by giving weightage to the most likely Value. Calculate Estimated Monetary Value (EMV) EMV = P x I This is used to identify and manage risk in projects. P is the probability of an event happening and I is the impact it can have in monetary terms. Calculate Risk Priority Number (RPN) RPN = Severity x Probability x Detection RPN is a value to rank risks. It is a direct multiplication of the three values. Calculate Earned Value (EV) EV = % Complete x Budget at Completion Budget at Completion is the total project value. Simply put, it is the estimated cost of all the work to be completed during the project. Calculate Cost Variance (CV) CV = Earned Value – Actual Cost This measures the difference between the budgeted costs and the actual costs Calculate Schedule Variance (SV) SV = Earned Value – Planned Value This checks the value of the actual work against the planned progress Calculate Cost Performance Index (CPI) CPI = Earned Value / Actual Cost CPI is an indicator if the project is going as per budget Calculate Schedule Performance Index (SPI) SPI = Earned Value / Planned Value The Schedule Performance Index measures how efficient the project schedule is. Calculate Estimate at Completion (EAC) EAC = Budget at Completion / Cost Performance IndexEAC = Actual Cost + Bottom –up Cost to CompleteEAC = Actual Cost + (Budget at Completion – Earned Value)EAC = Actual Cost + [(Budget at Completion – Earned Value) / (Cost performance Index x Schedule Performance Index)] Estimate at Completion is an indicator that forecasts the actual budget that may be needed at the current stage. It can be calculated as per any of the four methods. Calculate Variance at Completion Variance at Completion = Budget at Completion – Estimate at Completion It estimates additional budget required or a surplus that would be available at the completion of the project Calculate Estimate to Complete (ETC) TCPI = (Budget at Completion – Earned Value) / (Estimate at Completion – Actual Cost)TCPI = (Budget at Completion – Earned Value) / (Budget at Completion – Actual Cost) TCPI tells the project manager the cost performance that is required to complete the project. Calculate Standard Deviation Standard Deviation (σ) = (Pessimistic – Optimistic) / 6 Standard deviation indicates how reliable the estimated values are and how likely they are to vary during the actual project Calculate Communication Channels Communication Channels = n(n-1) / 2 This formula lets you understand the number of communication channels needed in a project. Here n is the number of stakeholders involved in the project Calculate Cost plus Percentage of Cost Cost plus Percentage of Cost = Cost + n% I pre-decided percentage of cost is added to the actual cost Calculate Cost plus Fixed Fee Cost plus Fixed Fee = Cost + n A pre-decided amount is added to the actual cost incurred Calculate Cost plus Award Fee Cost plus Award Fee = Cost + n A fixed fee is added to the actual cost along with reimbursements for expenses Calculate Cost plus Incentive Fee Cost plus Incentive Fee = Cost + n In addition to the cost an incentive is paid if the project is done within the budget or at a lower cost Calculate Return on Investment (ROI) ROI = (Net Profit / Cost of Investment) x 100 This indicates how investment in a project is performing Calculate Payback Period Payback Period = Initial Investment / Periodic Cashflow This refers to the time required to recover the funds invested in a project Calculate Cost Benefit Ratio Cost Benefit Ratio = Net Present Value of Investment / Initial Investment Cost It is a number that measures the monetary benefits of a project against the cost involved in it Calculate Present Value (PV) PV = Future Value / (1 + i)n This considers the time value for money and discounts from the future value. “i” represents the interest rate and n represents the time periods. Calculate Future Value (FV) FV = Present Value x (1 + i)n Used to measure value at a future date. “i” represents the interest rate and n represents the time periods. Calculate Target Price Target Price = Target Cost + Target Fee This is a price arrived by both the buyer and seller Calculate the Point of Total Assumption PTA = [(Ceiling Price — Target Price) / Buyer’s Share Ratio] + Target Cost This is the cost above which the seller will have to bear the additional costs incurred

## Example with formular Present Value (PV), Future Value (FV), Target Price and Point of Total Assumption

22. Present Value (PV) Formula: PV = Future Value / (1 + i)n   Present Value (PV) considers the time value of money. This is useful to calculate what a future amount of money would mean today if adjusted for time. ‘i’ represents the interest rate or the discounting rate. ‘n’ represents t...

## Example with formular Return on Investment (ROI), Payback Period and Cost Benefit Ratio

19.  Return on Investment (ROI) Formula: ROI = (Net Profit / Cost of Investment) x 100   Return on Investment is the measurement of the rate at which the amount invested in a project gets recovered. This is expressed as a percentage. If net profit is \$2000 and the Cost of Investment is ...

## Example with formular Cost plus Fixed Fee, Cost plus Award Fee and Cost plus Incentive Fee

16. Cost plus Fixed Fee Formula: Cost plus Fixed Fee = Cost + n   This is done in a contract where the buyer agrees to pay all the costs plus a pre-decided amount to the seller. ‘n’ stands for the fixed amount that is to be paid apart from the costs. With the cost at 50 and ‘n’ at 5 that...

## Example with formular Standard Deviation, Communication Channels and Cost plus Percentage of Cost

13. Standard Deviation Formula:  Standard Deviation (σ) = (Pessimistic – Optimistic) / 6  Standard Deviation expressed by the character ‘ σ’ represents the degree to which the values can change within a project. Let's imagine a task that takes 4 days to complete in the best case and 16 d...

## Example with formular Variance at Completion, Estimate to Complete (ETC) and To Complete Performance Index (TCPI)

10. Variance at Completion Formula:  Variance at Completion = Budget at Completion – Estimate at Completion   Variance at Completion calculates how much the project budget is accurate to the planned budget. This will help you to plan and estimate requirements more accurately.   If ...

## Example with formulas Beta Value in PERT, Expected Monetary Value (EMV) and Risk Priority Number

1. Beta Value in PERT Formula: Beta = (Pessimistic + 4 Most Likely + Optimistic) / 6   Beta value in PERT (Program Evaluation and Review Technique) is a weighted average taken from three values. Optimistic Value, Most Likely Value, and Pessimistic Value. Suppose a task takes 5 days to fi...

## Example with formular Cost Performance Index (CPI), Schedule Performance Index (SPI) and Estimate at Completion (EAC)

7.  Cost Performance Index (CPI)   Formula CPI = Earned Value / Actual Cost   The Cost Performance Index measures the cost efficiency of the project in utilizing the funds invested in it.  It is calculated through dividing earned value by actual cost. A higher CPI means that you are exce...

## Example with formulas Earned Value, Cost Variance and Schedule Variance

4. Earned Value Formula:  EV = % Complete x Budget at Completion   Earned Value estimates the amount of work done in terms of monetary value.   It is calculated by multiplying the percentage of work completed and the project value represented by budget at completion.   If the Bu...