Formulas Flashcards
Schedule Variance (SV)
SV = EV - PV
Schedule Variance = Earned Value - Planned Value EV = % complete * BAC > 0 positive = ahead of schedule < 0 negative = behind schedule = 0 on schedule of project is complete
Schedule Performance Index (SPI)
SPI= EV / PV
Schedule Performance Index = Earned Value / Planned Value EV = % complete * BAC SPI < 1 : behind schedule SPI = 1 : on schedule SPI > 1: Ahead of schedule
Present value (PV)
The value today of future cash flows.
PV= FV / (1+r)n
FV = future value r= interest rate N = number of times period
Net present value (NPV)
Present value of the total benefits (income or revenue) minus the cost over many times period
If positive project is a good choice unless and even better investment opportunity exists. Project with greater NPV is selected. Bigger is better (NPV)
Internal rate of return (IRR)
The higher the IRR number the better
Payback period
Refers to the length of time it takes for the organization to recover its investment in the project before it starts accumulating profit
Less is better. Net Investment / avg. annual cash flow
Cost benefit analysis
Consorts the expected cost of the project to the potential benefits
Benefits ratio > 1 = benefits are greater than the cost
Benefits ratio < 1= cost is greater than the benefit
Economic value added
Connect with whether the project returns to the company more value than the initiative costs.
Opportunity cost
Opportunity given up by selecting one pertinent over another
Sunk costs
Sink costs are expended costs. Accounting standards say that wink costs should not be considered when deciding whether to continue with a troubled project
Law of diminishing return
After a certain point adding more input (resources) will not produce a proportional increase in productivity
Working capital
Current assets minus current liabilities for an organization. It is the amount of money the company has available to invest including investment in projects
Depreciation
Straight line - same amount of depreciation every year
Accelerated depreciation - 2 forms
- double declining balance
- sum of the years digit
PM Communication (Comm.)
90%
Communication Channels
n(n-1) / 2
n = # of stakeholders (team members), including PM
Acronyms
AC - Actual Cost BAC - Budget at Completion BCR - Benefit Cost Ratio CBR - Cost Benefit Ratio CPI - Cost Performance Index CV - Cost Variance DUR - Duration EAC - Estimate at Completion EF - Early Finish EMV - Expected Monetary Value ES - Early Start ETC - Estimate to Complete EV - Earned Value FV - Future Value IRR - Internal Rate of Return LF - Late Finish LS - Late Start NPV - Net Present Value PERT - Program Evaluation and Review Technique PTA - Point of Total Assumption PV - Planned Value PV - Present Value ROI - Return on Investment SPI - Schedule Performance Index SV - Schedule Variance VAC - Variance at Completion 0 - Sigma / Standard deviation ^ - "To the power of" (2^3 = 2*2*2 = 8)
Cost Variance (CV)
CV = EV - AC
EV = % complete * BAC AC = Actual Cost < 0 over budget > 0 within budget = on budget
Earned Value (EV)
EV = % complete * BAC
BAC = Budget at completion
Cost Performance Index (CPI)
CPI = EV / AC
EV = % complete * BAC AC = Actual Cost < 1 over budget > 1 under budget = 1 on budget
Estimate at Completion (EAC)
The expected total cost of completing all work expressed as the sum of the AC to date and the estimate to complete
If CPI is expected to be the same for the remainder of the project, EAC can be calculated using:
EAC = BAC / CPI
If future work will be accomplished at the planned rate, use: performance was bad in the past but the budget is still intact for the remainder of the work
EAC = AC + (BAC - EV) - future variance are atypical
If the initial plan is no longer valid, use:
EAC = AC + New ETC (bottom-up ETC)
If both the CPI and SPI influence the remaining work use:
EAC = AC [(BAC - EV) / (CPI x SPI)]
Estimate to Complete (ETC)
The expected cost to finish all the remaining project work
assuming work is proceeding on plan, the cost of completing the remaining authorized work can be calculated using:
ETC = EAC - AC
Re-estimate the remaining work from the bottom up
ETC = re-estimate
To Complete Performance Index (TCPI)
A measure of the cost performance that must be achieve with the remaining resources in order to meet a specified management goal, expressed as the ratio of the cost to finish the outstanding work to the budget available
the efficiency that must be maintained in order to complete on plan
TCPI = (BAC - EV) / (BAC - AC)
the efficiency that must be maintained in order to complete the current EAC
TCPI = (BAC - EV) / (EAC - AC)
> 1 = harder to complete
< 1 = easier to complete
= 1 = same to complete
Estimated Time (Three-Point est PERT)
(P + 4M + O) / 6
Pessimistic
Most likely
Optimistic
Standard Deviation
(P - 0) /6
pessimistic
optimistic
Variance
[(P - 0) /6] squared
Float or Slack
LS - ES and LF - EF
Benefit-Cost Ratio
Bigger is better (BCR or Benefit / Cost) revenue or payback vs . cost
Planned value (PV)
The auth. budget assigned to schedule work. The value of the work planned to be completed to a point in time, usually the data date, or project completion
Budget at Completion (BAC)
the sum of all budgets established for the work to be performed
the value of total planned work, the project cost baseline
Variance at Completion (VAC)
VAC = BAC - EAC
the estimated difference in cost at the completion of the project
+ = under planned cost
- = over planned cost
= on planned cost
PTA (Point of Assumption, break point)
PTA ( Point of assumption, break point)
You are managing a project for a customer based on a cost-reimbursable target cost contract with the following terms:
Target costs: $1,000,000
Fixed fee:$100,000
Benefit/cost sharing:80% / 20%
Price ceiling:$1,200,000
PTA = (Ceiling Price - Target Price)/Buyers Ratio + Target Cost PTA =( $1.2M - 1.1M)/ .20 + $1M PTA = $100k/.20 +$1M PTA = $500K+ $1M PTA = $1,500M
