1. Excel Tutorial 9 Developing a Financial Analysis

2. Objectives
Work with financial functions to analyze loans and investments
Create an amortization schedule
Calculate a conditional sum
Interpolate and extrapolate a series of values
Calculate a depreciation schedule
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3. Objectives Determine a payback period Calculate a net present value
Calculate an internal rate of return
Trace a formula error to its source
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4. Working with Loans and Investments
To calculate the present value of a loan or investment, use the PV function
To calculate the future value of a loan or an investment, use the FV function
To calculate the size of the monthly or quarterly payments required to pay off a loan or meet an investment goal, use the PMT function
To calculate the number of monthly or quarterly payments required to pay off a loan or meet an investment goal, use the NPER function
To calculate the interest of a loan or investment, use the RATE function
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5. Working with Loans and Investments
=PMT(rate, nper, pv, [fv=0] [type=0])
=FV(rate, nper, pmt, [pv=0] [type=0])
=NPER(rate, pmt, pv, [fv=0] [type=0])
=PV(rate, nper, pmt, [fv=0] [type=0])
=RATE(nper, pmt, pv, [fv=0] [type=0])
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6. Calculating a Loan Payment
The functions to work with loans are the same ones you used to work with investments
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7. Creating an Amortization Schedule
To calculate the amount of interest due in a specified payment period from a loan, use the IPMT function
To calculate the amount of a loan payment used to pay off the principal of the loan, use the PPMT function
=IPMT(rate, per, nper, pv, [fv=0] [,type=0])
=PPMT(rate, per, nper, pv, [fv=0] [,type=0])
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8. Creating an Amortization Schedule
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9. Calculating Yearly Interest and Principal Payments
One way of calculating totals from several payment periods is to use the Analysis Tool-Pak add-in
=CUMIPMT(rate, nper, pv, start, end, type)
=CUMPRINC(rate, nper, pv, start, end, type)
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10. Calculating Yearly Interest and Principal Payments
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11. Projecting Future Income and Expenses
An income statement, also known as a profit and loss statement, shows how much money a business makes or loses over a specified period of time
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12. Interpolating a Series of Values
Select the range with the first cell containing the starting value, blank cells for middle values, and the last cell containing the ending value
In the Editing group on the Home tab, click the Fill button, and then click Series
Specify whether the series is organized in rows or columns and the type of series to interpolate. Check the Trend check box
Click the OK button to insert the interpolated series into the middle cells
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13. Extrapolating a Series of Values
Select a range with the first cell containing the starting value followed by blank cells to store the extrapolated values
In the Editing group on the Home tab, click the Fill button, and then click Series
Select whether the series is organized in rows or columns. Select the type of series to extrapolate into the blank cells. Enter the step value in the Step value box
Click the OK button to insert the extrapolated series into the blank cells
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14. Extrapolating a Series of Values
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15. Calculating Depreciation
To calculate a straight-line depreciation, use the SLN function
To calculate a declining balance depreciation, use the DB function
To calculate a sum-of-years’ digit depreciation, use the SYD function
To calculate a double-declining balance depreciation, use the DDB function
To calculate a variable depreciation, use the VBD function
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16. Calculating Depreciation
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17. Working with Payback Period
One simple measure of the return from an investment is the payback period, which is the length of time required for an investment to recover its initial cost
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18. Calculating Net Present Value
The time value of money is based on the assumption that money received today is worth more than the same amount received later
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19. Determining the Return from an Investment
To calculate the net present value when the initial investment is made immediately, use the NPV function with the discount rate and the series of cash returns from the investment. Subtract the cost of the initial investment from the value returned by the NPV function
To calculate the net present value when the initial investment is made at the end of the first payment period, use the NPV function with the discount rate and the series of cash returns from the investment. Include the initial cost of the investment as the first value in the series
To calculate the internal rate of return, use the IRR function with the cost of the initial investment as the first cash flow value in the series. For investments in which there are several positive and negative cash flow values, include a guess to aid Excel in arriving at a reasonable internal rate of return value
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20. Using the NPV Function =NPV(rate, value1 [value2, value3, ...])
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21. Using the NPV Function
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22. Calculating the Internal Rate of Return
The point at which the net present value of an investment equals 0 is the internal rate of return (IRR)
=IRR(values, [guess=0.1])
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23. Calculating the Internal Rate of Return
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24. Exploring other Financial Functions
For cash flows that appear at unevenly spaced intervals, you use the XNPV and XIRR functions
=XNPV(rate, values, dates)
=XIRR(values, dates, [guess = 0.1])
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25. Tracing Error Values Select the cell containing an error value
In the Formula Auditing group on the Formulas tab, click the Error Checking button arrow and then click Trace Error
Follow the tracer arrows to a precedent cell containing an error value
If the tracer arrow is connected to a worksheet icon, double-click the tracer arrow and open the cell references in the worksheet
Continue to trace the error value to succeeding precedent cells. When you locate a cell containing an error value that has no precedent cells with errors, you have located the source of the error
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26. Tracing Error Values
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