Sunday, September 23, 2007
Display Scenarios Using a Drop-Down List
In my finance classes at Metro State, I frequently use Excel as a presentation program. I prefer it to PowerPoint because it allows me to do a live demonstration of concepts, rather than showing static slides with static pictures.
One tool that is very often useful is Excel’s Scenario Manager. If you aren’t familiar with it, the Scenario Manager is a tool that lets you specify values to place into certain cells when you choose to display a scenario. So, you can have one worksheet, but display any of several scenarios (best base, base case, worst case, etc). The problem with this tool is
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Tuesday, June 19, 2007
The NPV Function Doesn’t Calculate Net Present Value
One of the things that has always driven me nuts (because I have to repeatedly explain it in class) is that the NPV function in spreadsheets doesn’t really calculate NPV. Instead, despite the word “net,” the NPV function is really just a present value of uneven cash flow function. It has always been this way, so I’ve learned to live with it. I suspect that this goes all the way back to Visicalc (which you can download and run in a DOS window).
Net present value is defined as the present value of the expected future cash flows less the initial cost of the investment. “Net” always means
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