PV and FV
Submitted by rwmv on Thu, 05/09/2013 - 09:47
Can anyone please explain Present Value and Future formula.Here is an example comparison of two projects using this technique:
Here is an example comparison of two projects using this technique:
Project A is expected to make $100,000 in two years.
Project B is expected to make $120,000 in three years.
If the cost of capital is 12 percent, which project should you choose?
Using the PV formula used previously, calculate each project’s worth:
Forums:
crushPMP
Thu, 05/09/2013 - 18:55
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Project 1PV = FV/ (1 +
Project 1
PV = FV/ (1 + r)^n
PV = 100/ (1 + 0.12)^2
PV = 79719.387755
Project 2
PV = FV/ (1 + r)^n
PV = 120/ (1 + 0.12)^3
PV = 85413.629737
Project 2 wins
rwmv
Sun, 05/12/2013 - 06:03
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Thank you
This helps.
one last question, if I get Cost management answers wrong, Can I still pass pmp exam? I know I can get a few right. but I am really challenged in this area. I am scheduled to appear for exam on 22nd May. I have been doing fairly well in other areas, at 70%.
Should I take the exam or reschedule it.? I want to pass it in first attempt. Please advise.
cnpatilpmp2012 (not verified)
Sun, 05/12/2013 - 07:43
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PV Calculation method
I think method of calcualtion should be as below:
Project A:
PV={100000/(1+0.12)^1 }+ {100000/(1+0.12)^2}
Project B:
PV={120000/(1+.12)^1} +{120000/(1+0.12)^2 }+ {120000/(1+0.12)^3}
The answer would be correct, as Project B. Please correct me If I'm wrong.
Regards
CN patil