Excel | Scenarios exercise | Showing summary of scenarios XL 07

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Software ==> Excel  (151 exercises)
Version ==> Excel 2010 and later
Topic ==> Scenarios  (2 exercises)
Level ==> Average difficulty
Subject ==> Excel training
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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):

Excel 2010 exercise - Scenarios (image 1)

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:

Excel 2010 exercise - Scenarios (image 2)

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.

You can unzip this file to see the answers to this exercise, although please remember this is for your personal use only.
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