Financial Modeling Project

[Guest]

Hi,

I am working on a project that entails finding the $ value of making an
investment, but it is not a straightforward question of forecasting out and
finding the net present value. Instead, the forecast has to asume 2 diverse
scenarios which may or may not occur (let me call them A and B). Then I have
to calculate revenues and profits for both scenarios, and find an average
value to recommend to my manager.

My general questions are (Just an addition: I am pretty well versed with all
basic excel functionalities, reasonable comfortable with solver and data
tables, and use
including financial tools such as IRR, NPV etc)

1. What excel functionalities (other than the basic ones I have mentioned)
would you use to go about this project? I am also looking for bells and
whistles which will help me impress my manager! (Nb: I am not into
programming)

2. Would you incorporate probabilities into the exercise? (e.g.g probability
of event A happening) and, if so, how?

3. Any other suggestion is welcome!

I will be happy to be given links, free downloads/add ons, general
suggestions etc that point me in the right direction. I understand that
detailed replies will be time consuming for you.

Thanks!

Manish

 

[Carim]

Hi,

May be you would find some inspiration in scenarios ...
http://www.contextures.com/xlScenario01.html

HTH
Cheers
Carim

 

[Mike Middleton]

Manish -

Just some standard ideas from modern decision analysis: Use NPV to value
each scenario. Display results using a decision tree (for two or more
discrete outcomes), or use Monte Carlo simulation to handle multiple
uncertainties (discrete or continuous). Reconsider using an "average value;"
instead, show the entire range of possibilities. For decision tree add-ins,
consider my TreePlan (http://www.treeplan.com) or Palisade's PrecisionTree.
For Monte Carlo simulation, consider my RiskSim or industrial-strength
Crystal Ball.

- Mike
http://www.mikemiddleton.com