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1. PERT (P + 4M + O )/ 6 Pessimistic, Most Likely, Optimistic
2. Standard Deviation (P – O) / 6
3. Variance [(P – O)/6 ]squared
4. Float or Slack LS-ES and LF-EF
5. Cost Variance EV – AC
6. Schedule Variance EV – PV
7. Cost Perf. Index EV / AC
8. Sched. Perf. Index EV / PV
9. Est. At Completion (EAC) BAC / CPI,AC + ETC — Initial Estimates are flawed

AC + BAC – EV — Future variance are Atypical

AC + (BAC – EV) / CPI — Future Variance would be typical

10. Est. To CompletePercentage complete EAC – ACEV/ BAC
11. Var. At Completion BAC – EAC
12. To Complete Performance Index TCPI Values for the TCPI index of less then 1.0 is good because it indicates the efficiency to complete is less than planned. How efficient must the project team be to complete the remaining work with the remaining money?( BAC – EV ) / ( BAC – AC )
13. Net Present Value Bigger is better (NPV)
14. Present Value PV FV / (1 + r)^n
15. Internal Rate of Return Bigger is better (IRR)
16. Benefit Cost Ratio Bigger is better ((BCR or Benefit / Cost) revenue or payback VS. cost)Or PV or Revenue / PV of Cost
17. Payback Period Less is betterNet Investment / Avg. Annual cash flow.
21. Order of Magnitude Estimate -25% – +75% (-50 to +100% PMBOK)
22. Budget Estimate -10% – +25%
23. Definitive Estimate -5% – +10%
24. Comm. Channels N(N -1)/2
25. Expected Monetary Value Probability * Impact
26. Point of Total Assumption (PTA) ((Ceiling Price – Target Price)/buyer’s Share Ratio) + Target Cost
Sigma σ
  • 1σ = 68.27%
  • 2σ = 95.45%
  • 3σ = 99.73%
Return on Sales ( ROS ) Net Income Before Taxes (NEBT) / Total Sales ORNet Income After Taxes ( NEAT ) / Total Sales
Return on Assets( ROA ) NEBT / Total Assets ORNEAT / Total Assets
Return on Investment ( ROI ) NEBT / Total Investment ORNEAT / Total Investment
Working Capital Current Assets – Current Liabilities
Discounted Cash Flow Cash Flow X Discount Factor
Contract related formulas Savings = Target Cost – Actual CostBonus = Savings x Percentage

Contract Cost = Bonus + Fees

Total Cost = Actual Cost + Contract Cost

F rom:

ormulas You Must Know

Acroynyms Used in Formulas

AC Actual Cost of the Work Performed
BAC Budget at Completion (Project budget)
CV Cost Variance
CPI Cost Performance Index
EAC Estimate at Completion
ETC Estimate to Complete
EV Earned Value (Budgeted Cost of the Work Performed)
PV Planned Value (Budgeted Cost of the Work Scheduled)
SV Schedule Variance
SPI Schedule Performance Index
VAC Variance at Completion

Cost and Schedule Formulas

CV = EV – AC
SV = EV – PV

CV and SV are also known as progress formulas. CPI and SPI are also known as efficiency indicators.

CV (cost variance) measures money. SV (schedule variance) measures time. To get from CV to CPI or SV to SPI, just change the minus sign to a division sign. CPI and SVI are efficiency indicators.

With CV and SV, positive values are good (under budget, ahead of schedule). Similarly, with CPI and SPI, values greater than 1 are good.

Remember that in the cost and schedule formulas, EV is always the first value.

Forecasting Formulas

(simplest formula: typical or no variances) EAC = BAC / CPI
(atypical variances) EAC = AC + (BAC – EV)
(typical variances) EAC = AC + (BAC – EV) / CPI
(atypical variances) ETC = BAC – EV
(typical variances) ETC = (BAC – EV) / CPI

Note that the second formulation for EAC could be restated as


ETC (estimate to complete) measures work which is still outstanding.
EAC (estimate at completion) measures total work when the project is complete.
Both are calculated differently depending on whether the variances so far are typical or atypical.

PERT Formulas for Activity Duration Estimating

Activity Length = (P+4M+O) / 6
Activity Std. Dev = (P-O) / 6
Activity Variance = ((P-O) / 6)2

where P is the pessimistic estimate, O is the optimistic estimate and M is the most likely estimate.

The Activity Length formula is also known as the “three point estimate.”

Remember that you cannot simply add standard deviations; you must calculate variances (the standard deviation squared), sum them and then take the square root.

Critical Path Formulas for Activity Duration Estimating

Activity Duration = EF – ES or LF – LS
Activity Float = LS – ES or LF – EF

Remember CPM is deterministic, using specific durations; PERT is probabilistic, using statistical estimates of durations.

Quality Formulas (Normal Distribution)

1 sigma = 68.26%
2 sigma = 95.46%
3 sigma = 99.73%
6 sigma = 99.99985%

Financial Formulas

These formulas are used in budgeting and project selection.

Payback period: number of years until the sum of future cash flows equals the initial investment.
PV equation
NPV equation
IRR equation

Examples of using the financial formulas

  • Payback Period: Obviously this is an extremely rough calculation which does not take into account the time value of money. If the initial investment is $10,000, and the cash flows are:
    Year Amount (FV)
    1 $2000
    2 $2000
    3 $2000
    4 $2000
    5 $2000
    6 $2000
    7 $2000
    8 $2000

    then the payback period is 5 years.

  • PV: The present value is the discounted value of a future cash flow. A “discount” is required because the present value of money is greater than the future value of money. It is expressed:
    PV = FV/(1 + r)n, where r is the interest rate (or cost of capital) and n is the years.

    What is the present value of an investment which pays $10,000 five years from now with an interest rate of 10% ?
    $10,000 / (1 + .1) 5 = $6209.

  • NPV: The net present value is the sum of all future discounted cash flows. Using the calculations from the payback period example, and assuming a 10% cost of capital,
    Year Amount (FV) PV
    1 $2000 $1818
    2 $2000 $1653
    3 $2000 $1503
    4 $2000 $1366
    5 $2000 $1242
    6 $2000 $1129
    7 $2000 $1026
    8 $2000 $933

    So the present value of the next 8 years of cash flows is $10,670.

    Also remember NPV is *net*, so if there is an initial investment, it must be subtracted. In other words, if this investment cost $10,000, the NPV would be $670, not $10,670.

  • IRR – the Internal Rate of Return is the discount rate when the present value of cash flows is the same as the initial investment. Higher IRRs are preferred to lower ones. IRR is determined by trial and error, computing NPV with various interest rates.

Other Formulas

EV = (% complete) * BAC
Communication Channels = (N * (N-1)) / 2 [where N is the number of parties]
Overhead rate = (charge rate per hour – pay rate per hour) / pay rate per hour

Old Acroynms

BCWP Budgeted cost of work performed – old term for EV
BCWS Budgeted cost of work scheduled – old term for PV
ACWP Actual cost of work performed – old term for AC

You probably won’t need to know these but they’re here for reference.

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