- Project Management Terms
- Agile - The Definition of Continuous Change
- Servant Leadership - A Key Leadership Style in Agile
- 6 Steps to making reasonable decisions
- What is the BOSCARD method
- PEST Analysis: How Political, Economic, Social, and Technological Factors Impact Your Business
- 49 Processes in Project Management
- What is Aggregate Planning in Project Management?
- 25 PMP Formulas you must remember to pass the PMP exam
- Example with formulas Earned Value, Cost Variance and Schedule Variance
- Example with formular Cost Performance Index (CPI), Schedule Performance Index (SPI) and Estimate at Completion (EAC)
- Example with formulas Beta Value in PERT, Expected Monetary Value (EMV) and Risk Priority Number
- Example with formular Variance at Completion, Estimate to Complete (ETC) and To Complete Performance Index (TCPI)
- Example with formular Standard Deviation, Communication Channels and Cost plus Percentage of Cost
- Example with formular Cost plus Fixed Fee, Cost plus Award Fee and Cost plus Incentive Fee
- Example with formular Return on Investment (ROI), Payback Period and Cost Benefit Ratio
- Example with formular Present Value (PV), Future Value (FV), Target Price and Point of Total Assumption
- Kanban Board - Agile Project Chart
- Gantt Chart - Roadmap Project Chart
- What is a Timeline View in Project Management?
- PERT Chart - The Most Popular Project Management Diagram
- Work-Breakdown Structure (WBS) Chart
- Flowchart in Project Management
- Cause-Effect Project Charts - Fishbone Diagram
- Burn-up and Burn-down Project Charts
- Bar Chart in Project Management
- What is Pareto Chart
- What is Pie Chart
- What is Control Chart
- What is Matrix Diagram
- What is Critical Path Diagram
- What is Cumulative Flow Project Chart
- What is Enterprise Environmental Factors
- What is Arrow Diagramming Method (ADM)
- What is Cost Baseline
- What is Cost-Benefit Analysis
- What is Cost Engineering?
- What is Cost Management Plan
- What is Cost of Quality?
- What is Cost Overrun?
- What is Cost Performance Index?
- What is Cost Plus Fixed Fee Contract?
- What is Cost Plus Incentive Fee Contract?
- What is Cost Plus Percentage Of Cost Contract
- What is Cost Reimbursable Contract?
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 the number of time periods. The period used should be the same for both variables. If the interest rate is 10% and the time period is 5 years. A Future Value of $20,000 will have a Present Value as calculated below
Future Value / (1 + i)n
20000/ (1+ 10%) 5
This means a future value of $20,000 in 5 years has a present value of $12,418 as of now.
23. Future Value (FV)
Formula: FV = Present Value x (1 + i)n
Future Value is an estimate of what a fixed amount of money would be valued at a given point of time in the future. ‘i’ is the interest rate and ‘n’ is the number of time periods. If Present value is $20,000, ‘i’ is 10% and time period is 5 years. Then we can calculate the Future value as
Present Value x (1 + i)n
20000 x (1+0.1)5
The Future Value of $20,000 in 5 years if the interest rate is at 10 percent will be $32,210
24. Target Price
Formula: Target Price = Target Cost + Target Fee
This is a simple addition of estimated cost and an agreed fee that is given to the seller on top of the target cost. This is useful when calculating price per unit. If Target Cost is $100 and Target fee is $20 the Target price will be Target Cost + Target Fee
100 + 20
In this case we get a Target price of $120
25. Point of Total Assumption
Formula: PTA = [(Ceiling Price — Target Price) / Buyer’s Share Ratio] + Target Cost
Point of Total Assumption is the point at which the seller has incurred costs that have stopped the project from being profitable. Any expense beyond the PTA is an additional expense incurred by the seller. If Ceiling Price is $25, Target Price is $20, Buyer’s share ratio is 5 and Target cost is $15 then we could calculate PTA as follows
[(Ceiling Price — Target Price) / Buyer’s Share Ratio] + Target Cost
With the above details we get a PTA of $16