List of Important PMP Formulas for Certification Exam
This post enumerates important PMP formulas required for the Project Management Professional (PMP) certification exam. Though the PMP exam does not require elaborate calculations, considering the time constraints recalling some formulas could be a challenge. Hence this resource could be of help to those preparing for the PMP exam as well as practicing professionals.e]
Table of Contents
PMP Formulas Project Selection Methods
Net Present Value (NPV) PMP Formulas
Present Value (PV) = Future Value (FV) / (1+k)N
- k = discounting factor / interest rate
- N = Number of time periods
Net Present Value = [Sum of present value of all future cash inflows] – [Cash outflow]
- NPV > 0 Accept the project
- NPV < 0 Reject the project
- While evaluating two or more projects select the project with greater NPV
Internal Rate of Return (IRR)
- IRR is the discount rate at which NPV = 0
- Select the project with higher IRR
- IRR > k accept the project
Benefit Cost Ratio (BCR) / Cost Benefit Analysis (CBA)
Ratio of sum of present value of all future cash inflows to project cash outflow.
- BCR > 1 Accept the project
- BCR < 1 Reject the project
Payback Period
Length of time it takes to recover investments done in a project before the project starts generating profit.
- Select projects with smaller payback period
Also read: Project Selection Methods
PERT PMP Formulas
Following are the PMP formulas for Program Evaluation and Review Technique (PERT)
Three Point Estimates PMP Formulas
3 Point Estimates Based on Beta Distribution
- Activity Duration / Cost Estimates = (P + 4M + O) / 6
- P = Pessimistic Value
- M = Most Likely Value
- O = Optimistic Value
- Standard Deviation = (P – O) / 6
- Variance = (Standard Deviation)2 = (P – O)2 / 36
3 Point Estimates Based on Triangular Distribution
- Activity Duration / Cost Estimates = (P + M + O) / 3
Also read: Program Evaluation And Review Technique
Critical Path Method (CPM) PMP Formulas
Early Start (ES) PMP Formulas
PMP formula for Early Start if the convention that project starts on day zero is adopted
Early Start (ES) =
- 0 for the first activity
- ES of the next node is the earliest finish time of the immediately preceding activity.
For activities with more than one preceding activity ES is latest of the earliest finish times of the preceding activities.
PMP formula for Early Start (ES) if the convention that project starts on day one is adopted.
Early Start (ES) =
- 1 for the first activity
- ES of the next node is the earliest finish time of the immediately preceding activity plus 1 = EF + 1
For activities with more than one preceding activity ES is latest of the earliest finish times of the preceding activities.
Early Finish (EF) PMP Formulas
PMP formula for Early Finish (EF) if the convention that project starts on day zero is adopted.
- Early Finish (EF) = ES + Activity Duration (D)
PMP formula for Early Finish (EF) if the convention that project starts on day one is adopted.
- Early Finish (EF) = ES + Activity Duration (D) – 1
Late Finish (LF) PMP Formulas
PMP formula for Late Finish (LF) if the convention that project starts on day zero is adopted.
Late Finish (LF) =
- LF of the last activity is equal to the EF of that activity
- LF of the next node in backward pass is the latest start time of the activity that immediately follows
For activities with more than one activity that immediately follow, LF is the earliest of the latest start times of those activities.
PMP formula for Late Finish (LF) if the convention that project starts on day one is adopted.
Late Finish (LF) =
- On Critical Path LF of the last activity is equal to the EF of that activity
- The latest start time of the activity of the previous node minus 1 = LS -1
For activities with more than one previous node, LF is the earliest of the latest start times of those activities.
Late Start (LS) PMP Formulas
PMP formula for Late Finish (LS) if the convention that project starts on day zero is adopted.
- Late Start (LS) = LF – Activity Duration (D)
PMP formula for Late Finish (LS) if the convention that project starts on day one is adopted.
- Late Start (LS) = LF – Activity Duration (D) + 1
Critical Path PMP Formulas
- For Critical Path ES = LS and EF = LF
- For Critical Path Total Float = 0
Total / Free Float PMP Formulas
- Total Float = LS – ES or LF – EF
- Free Float = (ES)S – (EF)C [When Start = 0] Where S = Successor Activity and C = Current Activity
- Free Float = (ES)S – (EF)C – 1 [When Start = 1]
Read Post Related to Critical Path Analysis
- Critical path method definitions and calculation steps please read
- Methods to sequence project activities please read my post
- Critical path method example with solution view post
- Schedule network analysis explanation and diagramming techniques please read
- Take the Critical Path Method Quiz
Cost to Crash
Cost to crash per period = (CC – NC) / (NT – CT)
- CC = The activity cost associated with the crash time
- NC = The activity cost associated with the normal time
- NT = The time necessary to complete the activity under normal conditions
- CT = The shortest possible time necessary to complete an activity
Cost Estimates PMP Formulas
- Rough Order of Magnitude (ROM) Estimates = -25% to +75%
- Definitive Estimates = -5% to +10%
Also Read: Wrong Cost Estimates Implications Solutions
Project Budget PMP Formulas
- Work Package Cost Estimates = Activity Cost Estimates + Activity Contingency Reserve
- Control Accounts = Work Package Cost Estimates + Contingency Reserve
- Cost Baseline = Summation of Control Accounts
- Project Budget = Cost Baseline + Management Reserve
Earned Value Management PMP Formulas
To view a complete list of Earned Value Management formulas visit the following resource page.
Earned Value Management Quiz
Take the Earned Value Management Quiz
Number of Communication Channels
- Number of communication channels = N(N – 1) / 2 ; Where N = Number of stakeholders
Statistics PMP Formulas
Mode
- Mode is the most frequently occurring value in a set of data.
Median
- Median is the middle value in the ordered set of numbers.
- For odd number of terms the middle number is the median.
- For an even number of terms the average of the middle two numbers is the median.
Mean
The arithmetic mean is the average of a group of numbers. It is calculated by adding all the numbers and dividing by the total count of the numbers.
- Mean (µ) = ∑ X / N = (X1 + X2 + X3 + . . . . XN) / N
Range
Range is the difference between the largest and the lowest value in the data set.
Deviation
It is also known as deviation from the mean. In order to compute the deviation subtract mean from each value of data. Also, deviation from mean indicates the spread of the data.
Mean Absolute Deviation (MAD)
Mean absolute deviation is the average of the absolute values of the deviations around the mean for a set of numbers.
Variance
Average of the squared deviations about the arithmetic mean for a set of numbers is variance.
- Variance (σ2) = ∑ (X – µ)2/ N
Standard Deviation
Standard deviation (σ) is square root of variance.
If a set of data is normally distributed then 68% of the data values fall within one standard deviation (µ ± 1σ) of the mean, 95% are within (µ ± 2σ ) and 99.7% with in (µ ± 3σ).
Also read: Variance Analysis In Project Management
Expected Monetary Value (EMV) PMP Formulas
EMV = Probability X Net Path Value
- Net Path Value = Pay offs – Costs along the path
- EMV of opportunities = Positive Value
- EMV of risks = Negative Value
Procurement Management PMP Formulas
- Target Price = Target Cost + Target Fee
- Final Fee = [(Target Cost – Actual Cost)*Sellers ratio] + Target Fee
- Final Price = Actual Cost + Final Fee
- Point of Total Assumption (PTA) = [(Ceiling Price – Target price) / Buyer’s Ratio] + Target Cost
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