Financial Modeling in Excel Day 2

Speed vs. Flexibility Tradeoff What we’re making flexible: – Long Term and Short Term Scooter Market Growth – Our Market Share – The time we need to capture market share – Discount rate / Cost of Capital – Anything else we have as an input What we are not making flexible – Real Options (e.g. Option to abandon / expand) – Demand Curve / Price Sensitivity – Leverage (except through discount rate)

Our Market Share Model We are linking our sales to a percentage of the scooter market. It might be reasonable to assume that it takes some time to generate market share Market Share Years Year_until_Max_MktShr Maximum Market Share

Vlookup() & Hlookup() These functions look up variable in a table, either horizontally or vertically. This is a good way to avoid hard coding when inputs don’t correspond to a function you can calculate. – Our example – MACRS schedules

Analysis The difference between A and B cases… Sensitivity Analysis: – Allows us to examine the importance of individual assumptions Scenario Analysis: – Allows us to examine important cases – E.g. best and worst case scenario