Have to calculate PV or NPV for exam?

Submitted by ireskier on Wed, 02/27/2013 - 18:45

Crowe, How to Pass on your First Try says on pg 44 'Note: that you are no longer required to calculate PV or NPV for the exam'.  Says you just need to remember that bigger is better.  Yet I keep seeing the forumulas in lists of things to memorize for the exam. 


Have any of you had to perform those calculations on the exam recently?  Would love to NOT have to memorize that one.  Thx.


 

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PMP / CAPM exam Question bank
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diba_perfect

Wed, 02/27/2013 - 19:37

PV & NPV calculations are not required to be performed in the actual PMP exam.

~ Diba

ireskier

Wed, 02/27/2013 - 20:39

That is music to my ears - thank you!  Taking the exam Friday, and stressed with working full-time and trying to cram.  Every little bit helps.  Thanks again.

pankaj_monga

Thu, 02/28/2013 - 09:27

It is required. I took exam on Feb 25 and there was one question to calculate NPV for three year horizon.

prakharsidana

Thu, 02/28/2013 - 06:20

Hi ,


We are still required to calculate this in the exam. I got couple of questions on this in my exam earlier this month.


Thanks


Prakhar

ireskier

Thu, 02/28/2013 - 12:25

Guess I better expect NPV and study for it.  Mixed messages if the prep books are telling us we don't need it, yet it's in some versions of exam.  Thank you.

sunitaPMP

Tue, 03/05/2013 - 02:20

So we  need to know how to calculate NPV in  exam?Please let me know.I have my exam on 17th March.

mercurie

Thu, 02/28/2013 - 06:30

 Rita advises us that it will not appear in the exam.

I have faced questions on PV calculation on many mock tests, but not in my PMP exam.

I made a mistake in the calculation for the mock test, as I used the given rate of 10%, as 10 itself in the formula. We should use it as 0 .1

PV= FV/(1+r) raised to n

If the rate is 10%, it should be FV/(1+0.1)... NOT              FV/(1+10)

With hindsight, of course it is common sense that the denominator cannot be 11, should be something slightly above 1. But common sense sometimes stops working while taking the exam;)

ireskier

Thu, 02/28/2013 - 12:31

Good point, thank you for reminder.  Truly can't imagine NOT making a mistake or two like this under pressure.  Will see tomorrow ...

rattanw

Thu, 02/28/2013 - 13:34

 Well you dont need to be overtly worried about it.  Just remember the following with regard to PV / NPV

 
Present Value means the value today of future cash flows.  While Net Present Value is the sum total of benefits minus the costs over a period of time (for example imagine a 10 year project with annual return of $ 10,000.  The total return obver a 10 year period will be $ 100,000.  However, is it really $ 100,000.  The answer is No.  Because the $ 10,000 earned in the 2nd year is not equal to $ 10,000 earned today).
 
If you understand this concept, then remembring the formula is hardly anything.  
 
For the exam, you may get 1 or two questions related to PV / NPV.  Calculating PV is simple.  And you certainly wont need to calculate NPV.  Just remember, higher NPV is better.
 
Another related concept is IRR or Internal rate of return.  Again, no calculations will be required in case you get a question on the exam.  Just remember, higher IRR is better.

ireskier

Thu, 02/28/2013 - 16:23

Ok, burned into brain!  Forging ahead, will post results of exam tomorrow :)

sspawar

Fri, 03/01/2013 - 00:04

it is true if concept is clear, It will hardly be a hurdle.

It is elementary maths.

PV formula is nothing but a reciprocal of compound interest formula.

if you remember your school maths 

FV (compunding amount)  = P(1+ (r in percent/100)^n), here P = principle amount, and P*(r in percent/100)^n is compounding interest.

In case PV , we write :

P= PV = FV / P(1+ (r in percent/100)^n),

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NPV is simple as a net profit over pv of cash inflow - pv of cash outflow.

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And I dont think it cant be asked in exam.

If I ask - what is today,s value of 1000 earned at the end of 2 year at 15 % interest per year.

in this question no any term like pv is given but concept and formula is the same.

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problem arises when -questions asked in bigger size and in tricky language and in varieties.

like a table of outflow and inflow is given for 4 years -----bla ---bla