Spreadsheet Models for Managers
Getting Access to Spreadsheet Models for Managers
If 
you use Excel to model businesses, business processes, or
business transactions, this course will change your life. You’ll learn how to create tools for yourself that will amaze
even you. Unrestricted use of this material is available in two ways.
- As a stand-alone Web site
- It resides on your computer, and you can use it anywhere. No need for Internet access.
- At this Web site
- If you have access to the Internet whenever you want to view this material, you can purchase on-line access. Unlimited usage. I’m constantly making improvements and you’ll get them as soon as they’re available.
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| Order "Spreadsheet Models for Managers, on-line edition, one month" by credit card, for USD 69.95 each, using our secure server, and receive download instructions by return email. |
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Make your check payable to Chaco Canyon Consulting, for the amount indicated:
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To use the course software you’ll need some other applications, which you very probably already have. By placing your order, you’re confirming that you have the software you need, as described on this site.
Spreadsheet Models for Managers
| Present and future value | 9/3 Session Links |
Present value and future value are just techniques for computing the value of an asset at one time given its value at another time. To do that computation, you need to know what the money equivalent of the asset’s value could earn at interest during the interval.
Most formulas that you see for computing present value and future value assume that the prevailing interest rate during that interval is constant. Of course, that assumption is often unrealistic. But we make it with regularity, and you’ll do well to remember that PV and fv formulas are only as good as the constant-interest-rate assumption.
In applying these concepts to non-monetary assets, there is a further complication — the action of the market for those assets. Market price movements can actually swamp the effects of interest-rate based calculations because the markets for some assets can be much more volatile than the markets for money. So if you’re computing the future value of, say, a Rembrandt, it might be unwise to use projections of the prime rate in a straightforward application of the future value formula. You might want to use a more comprehensive estimate that takes into account behavior of the market for paintings by the masters.
Last Modified: Wednesday, 27-Apr-2016 04:15:26 EDT
Nesting invocations of worksheet functions can be a bit tricky, because nested function calls are difficult to think about. Sometimes, in developing a spreadsheet model, we can gain clarity by avoiding nesting. That is, while we’re still thinking about how to approach a modeling problem, we intentionally choose to avoid nesting function calls. After we understand the problem better — and only then — we might go back and replace what we’ve done with a more compact version that exploits nesting. In addition to producing forms that are easier to think about, this practice of developing a simpler form first has another benefit. It enables us to examine intermediate values more easily, which enables us to confirm that the calculations we’re performing make sense.
Some feel that building something that you intend to replace is a waste of effort — that it’s far easier to build things in final form from the start. When that approach works, it is faster and more efficient. But when we think we’re likely to make mistakes, the “slower” way is faster.
In years past, we’ve learned that what makes a model dynamic — as opposed to static — can be difficult to grasp. If you have some doubts yourself, and you haven’t yet looked at the reading on Models vs. Tools, we believe that you will find it helpful.