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Excel | Scenarios exercise | Showing summary of scenarios XL 07
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Open the file in the above folder. This shows an investment appraisal model for a friend's business venture, in which you put in £40,000 at the end of year 1 and receive £10,000 back for 7 subsequent years. At a discount rate of 8%, the Net Present Value of the investment is £11,170.
Create formulae which bring the NPV and IRR onto the inputs sheet (this is necessary because a scenario can not change cells on one sheet and compare results cells from a different sheet):
Give your two cells range names as shown
Create the following 3 scenarios:
- Smaller dividends - the income for the 7 subsequent years is £9,000 only
- Higher initial investment - the original outgoing is £60,000, not £40,000
- Interest rate rise - the discount rate is 10%, not 8%
Which of these scenarios would produce the lowest NPV, do you think?
Create a summary report showing the NPV and IRR for each scenario:
Raising the initial Outlay had the worst effect of the NPV, but all of the scenarios lowered it
Save your workbook with the same name, then close it down.