Performing what-if analysis in business is very common, crucial even. What if a new project is delayed by 3 months? Or what if the company is unable to secure financing at the projected cost of capital? Successfully answering questions like these often means the difference between a business finally turning the corner and becoming profitable and, well, it not. But this type of analysis is also helpful for individuals. Far from overly complicated but seldom used by consumers, tools that allow for thoughtful consideration of important personal finance decisions should be used much more often then they are. They can help one understand how much more a car will cost over time or what term and interest rate combination is required to make sure the monthly payment fits into the family budget. They can even reveal how your credit scoreis helping or hurting you.
Data Tables, one of the features in Excel's What-If-Analysis Package, is a very useful tool for comparing.
So let’s dig in. How would you perform this type of analysis? What tools would you use? Microsoft Excel, of course! Until recently, I’d approach this—or any other 2 dimensional, two variable scenario– by building a grid in Excel with all of the intersection values. For example, I might look at an auto loan with six possible interest rates, 5% to 10%, and five different possible terms, ranging from one to five years. To fill out the grid, I’d utilize the power within absolute and relative references to allow easy copy and filling across all rows and columns of the grid. Read more of this post
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