Goldey-Beacom College

Quantitative Foundations and Business Applications

BUS598
Excel Functions Handout
By
Fatma Abdel-Raouf

Special Thanks to Stephanie Foster for her Help in Editing This

Handout

BUS598 Excel Functions Handout

Prepared by Fatma Abdel-Raouf
July 2012
Page 2 of 46

Table of Contents
Math and Trig Functions.................................................................................................................. 3
SUMPRODUCT........................................................................................................................... 3
RAND........................................................................................................................................ 6
Statistical Functions........................................................................................................................ 7
COUNTIF................................................................................................................................... 7
COUNTIFS............................................................................................................................... 11
NORM.INV............................................................................................................................... 12
Absolute and Relative Referencing................................................................................................ 15
What-If Analysis............................................................................................................................ 17
Scenario Manager...................................................................................................................... 17
Goal Seek................................................................................................................................... 22
Data Table.................................................................................................................................. 24
Solver............................................................................................................................................ 28
References.................................................................................................................................... 40

BUS598 Excel Functions Handout

Prepared by Fatma Abdel-Raouf
July 2012
Page 3 of 46

Math and Trig Functions

SUMPRODUCT
Returns the sum of the products of corresponding array components:
=SUMPRODUCT ([array1], [array2], [array3],...)

Example:
Grades for a student in a class are 80 in exam I, 90 in exam II, 85 in the final exam, and 92 for
the homeworks. If the weights are 20% for exam I, 25% for exam II, 40% for the final exam, and
15% for the homeworks, what is the weighted total course grade for this student? (The weighted
total course grade is the sum of the product of grades and weights).
Answer:
1. Put the grades in columns A and B.

2. Click on Insert Function in the Formulas tab, and in the Search for a function: dialog
box, type SUMPRODUCT and click Go.

BUS598 Excel Functions Handout

Prepared by Fatma Abdel-Raouf
July 2012
Page 4 of 46

3. Click Ok.

4. In Array1 put the cells that have the grades:

BUS598 Excel Functions Handout

Prepared by Fatma Abdel-Raouf
July 2012
Page 5 of 46

BUS598 Excel Functions Handout

Prepared by Fatma Abdel-Raouf
July 2012
Page 6 of 46

5. In Array2 put the cells that have the weights:

6. The answer is 86.3. The sum of the products of grades and weights (the weighted course
grade) is 86.3 points.

BUS598 Excel Functions Handout

Prepared by Fatma Abdel-Raouf
July 2012
Page 7 of 46

RAND
Returns an evenly distributed random real number greater than or equal to 0 and less than 1. A
new random real number is returned every time the worksheet is calculated.
=rand ()
One way to generate a random number is to:
1.

2.

Click on the Formulas tab, Function Library group, Math & Trig category, click on the
downward arrow and scroll down and select Rand.

Click Ok.

3. Click Ok .

This is your random number. Remember a new random real number is returned every time the
worksheet is calculated.

BUS598 Excel Functions Handout

Prepared by Fatma Abdel-Raouf
July 2012
Page 8 of 46

Statistical Functions
COUNTIF
Counts the number of cells within a range that meet the given criteria.
=COUNTIF (B2:B25,"Nancy")

Example:
Grades for students in your class are
80, 90, 85, 92, 90, 85, 95, 75, 70, 65, 90, 60, and 98.
You want to know how many students received a 90 in the class.
Answer:
1. Put the grades in column A.

BUS598 Excel Functions Handout

Prepared by Fatma Abdel-Raouf
July 2012
Page 9 of 46

2. Click on Insert Function in the Formulas tab, and in the Search for a function: dialog
box, type COUNTIF and click Go.

3. Click Ok

BUS598 Excel Functions Handout

Prepared by Fatma Abdel-Raouf
July 2012
Page 10 of 46

4. In Range put the cells that have the grades

5. In Criteria put your criterion.

BUS598 Excel Functions Handout

Prepared by Fatma Abdel-Raouf
July 2012
Page 11 of 46

6. Your answer is 3. You have three students who received a 90 in the class.

If you want to know the number of students with grades > 90, in the criteria put >90

If you want to know the number of students with grades 90, in the criteria put >=90

BUS598 Excel Functions Handout

Prepared by Fatma Abdel-Raouf
July 2012
Page 12 of 46

COUNTIFS
If you have two criteria, choose the formula countifs. For example, if want to know the
number of students with grades 70 and <90. In the criteria 1 put >=70 and in criteria 2 put
<90.

BUS598 Excel Functions Handout

Prepared by Fatma Abdel-Raouf
July 2012
Page 13 of 46

NORM.INV
Returns the inverse of the normal cumulative distribution.
NORM.INV(probability,mean,standard_dev)

Example 1:
To qualify for a police academy, candidates must score in the top 10% on a general ability test.
Assume that test scores are normally distributed with a mean of 200 and a standard deviation of
20. What is the lowest score to qualify? (Source: Bluman (2009) Elementary Statistics 7 th
edition. McGraw Hill.)
Answer:
1. Click on the Formulas tab, Function Library group, More Functions category, Statistical
and click on the arrow and scroll down and select NORM.INV.

2. In the probability, put 0.9 (1 0.1).

BUS598 Excel Functions Handout

Prepared by Fatma Abdel-Raouf
July 2012
Page 14 of 46

3. In the Mean put 200.

4. In the Standard_dev put 20.

BUS598 Excel Functions Handout

Prepared by Fatma Abdel-Raouf
July 2012
Page 15 of 46

5. The answer is 225.63 so the lowest possible score to qualify for the police academy is 226.

Example 2:
An advertising company plans to market a product to low-income families in a specific
neighborhood. A survey of this neighborhood shows that the average income per family is
$25,000 and the standard deviation is $5,000. If income is normally distributed and the company
plans to target the bottom 20% of the families based on income in this neighborhood, what is the
cutoff income that the company should use.
Answer:
Same steps as an example 1 until step 2, then complete the fields with the following:
Probability= 0.2
Mean =25000
Standard_dev= 5000

BUS598 Excel Functions Handout

Prepared by Fatma Abdel-Raouf
July 2012
Page 16 of 46

Your answer is $20,792.

Absolute and Relative Referencing

Relative cell reference allows you to copy the formula over different cells. For example, A2 is a
relative cell reference, it will be replaced by A3 if you are copying the formula down.
Absolute cell reference keeps the cell(s) fixed. You create absolute cell reference by using $
before each letter and/or number. For example $A$2 is an absolute cell so its value wont change
as you copy the formula across other cells. In other words, it wont be replaced by A3 as you
copy the formula down.
You can also mix a relative and absolute cell reference. For example, A$2 here the column A is
relative while the second row (row 2) is absolute or fixed. Putting a $ before any column or row
makes it absolute or fixed, whereas not having a $ before any column or row makes it relative.
BUS598 Excel Functions Handout
Prepared by Fatma Abdel-Raouf
July 2012
Page 17 of 46

Example:
You want to calculate the future value (FV) of different cash flows and different times but the
interest rate is the same. FV formula is:
FVn = PV (1+r)n
FVn=the FV in year n
PV= the present value
r=interest rate
n=number of years
Answer:
The data is in columns A and B below.

To get the FV, the following formula was used: =B4*(1+$C$1)^A4. In this formula, B4 and A4
are relative cell references and are replaced by B5 and A5 when the formula is copied down to
cell C5. Since C1 is an absolute cell reference, it remains the same as the formula is copied
down to C5, C6, etc...

BUS598 Excel Functions Handout

Prepared by Fatma Abdel-Raouf
July 2012
Page 18 of 46

At cell C5, B4 and A4 are replaced by B5 and A5 while C1 stays the same. Same is true for the
next cell C6
Notice the cell references in the formula in cell C6.

BUS598 Excel Functions Handout

Prepared by Fatma Abdel-Raouf
July 2012
Page 19 of 46

What-If Analysis
By using what-if analysis tools you are able to test several different sets of values in one or more
formulas to explore all the various results. This is a very useful tool which includes Scenario
Manager, Goal Seek, and Data Table.

Scenario Manager
Scenario manager in Excel is located under the Data tab, Data Tools group, What-If Analysis.

Click on the arrow-down in What-If Analysis and choose Scenario Manager.

Scenario Manager shows how a change in one or more inputs affects your result. It allows you to
change as many as 32 input cells. It lets you change one or more input into a formula or
function to see its effect on your result. The information needed to use Scenario Manager is as
follows:
1. Name your scenario
2. Define the set of input cells that you want to vary (changing cells).
3. Select the output cells (result cells) that you want to track.
4. The Scenario Manager then creates a report containing the inputs and the values of the
output cells for each scenario.
Example: Sensitivity Analysis
We want to calculate the internal rate of return (IRR) for a new project under different case
scenarios: best, most-likely, and worst scenarios based on the value of sales in different years.
Suppose that our expected cash flows (CFs) for the different scenarios are as follows:
Year
0
1
2
3
4

Expected Cash Flows (CFs)

Best
MostWorst
Case
Likely
Case
-50000
-50000
-50000
25000
21000
18000
20000
16000
12000
14000
11000
10000
18000
17000
15000
BUS598 Excel Functions Handout
Prepared by Fatma Abdel-Raouf
July 2012
Page 20 of 46

BUS598 Excel Functions Handout

Prepared by Fatma Abdel-Raouf
July 2012
Page 21 of 46

For each scenario, calculate the IRR based on these CFs, starting with the following data:

Answer:
1. With the Scenario Manager dialog box open (by choosing What-If Analysis under the
data tab), click Add.

BUS598 Excel Functions Handout

Prepared by Fatma Abdel-Raouf
July 2012
Page 22 of 46

2. Complete as follows:

3. Click OK, and put the values that define the best case scenario.

4. Click Add.

5. Complete steps 2-5 with the data for Most-Likely and Worst Case.
BUS598 Excel Functions Handout
Prepared by Fatma Abdel-Raouf
July 2012
Page 23 of 46

6. Click on Summary, in the results cells, type B7.

BUS598 Excel Functions Handout

Prepared by Fatma Abdel-Raouf
July 2012
Page 24 of 46

7. Click Ok and you will get a scenario summary table as follows:

So in the best case scenario, your IRR is 22%, in the most-likely case it is 12%, and in the worst
case scenario it is 4%.

BUS598 Excel Functions Handout

Prepared by Fatma Abdel-Raouf
July 2012
Page 25 of 46

Goal Seek
Goal Seeks allows you to change specific value in your formula to reach your goal. For example,
if you are getting a mortgage loan to buy a house and you want your monthly payment to be of
specific value, you can use Goal Seek to ask Excel to change one variable (say the interest rate
or the amount of the loan) to reach your goal of monthly payment.
Example:
You want to get a $200,000 mortgage loan to buy a house with 5% interest rate. You use Excel
to get the monthly payment (PMT function in Excel, under financial functions).

Your monthly payment is $1,073.64. Suppose you want your monthly payment to be $1,000 and
you want to change the interest rate to achieve that goal. Use Goal Seek to get the interest rate
needed for a $1,000 monthly payment on your loan.
Answer:
1. To begin the Goal Seek, click on the data tab, under What-If Analysis choose Goal Seek

2. In the Set cell click on B6. The Set cell field tells Excel about the cell that has the
formula with value you want to change to achieve your goal (the monthly payment
amount).
3. In the To value put 1000. The To value field tells Excel about the goal you want to
reach, in this case $1000.
BUS598 Excel Functions Handout
Prepared by Fatma Abdel-Raouf
July 2012
Page 26 of 46

BUS598 Excel Functions Handout

Prepared by Fatma Abdel-Raouf
July 2012
Page 27 of 46

4. In By changing cell click on B4. The By changing cell field tells Excel about the cell that
has the variable you want to change to achieve your goal (the interest rate).

5. Click Ok

6. Tthe results apprear on your original worksheet. Cell B6 has the desired monthly
payment and cell B4 has the solution Excel reached for you. At an interest rate of 4%,
your monthly payment will decrease to $1,000, which is your goal. To accept the changes,
click Ok and Excel will keep these values on your worksheet.

BUS598 Excel Functions Handout

Prepared by Fatma Abdel-Raouf
July 2012
Page 28 of 46

Data Table
Data Table is similar to Scenario Manager but you can only vary one variable and see its effect on
your outcome. For example, you are getting a mortgage loan and you want to see how much is
your monthly payment is under different interest rates.
Example:
You want to get a loan of $20,000 to buy a car. The loan is for five years and the interest rate is
7%. The monthly payment on your loan is $396.02. You want to know how much your monthly
payment will be at different interest rates?

BUS598 Excel Functions Handout

Prepared by Fatma Abdel-Raouf
July 2012
Page 29 of 46

Answer:
1. Highlight the columns that have the values you want to replace. In this example we want
to replace the Monthly Payment.

2. To begin the Data Table, click on the Data tab, Data Tools group, What-If Analysis and
choose Data Table

BUS598 Excel Functions Handout

Prepared by Fatma Abdel-Raouf
July 2012
Page 30 of 46

3. If your data is in column form, in the Column input cell field, click on the cell reference
for the first substitution. In our example, click on cell A5.

4. Click OK.

BUS598 Excel Functions Handout

Prepared by Fatma Abdel-Raouf
July 2012
Page 31 of 46

5. Excel displays the results in the second column. You can reduce the number of decimal
points to two by clicking on the reduce decimal icon on the Home tab, Number group.

6. You get

BUS598 Excel Functions Handout

Prepared by Fatma Abdel-Raouf
July 2012
Page 32 of 46

Solver
Excel solver is a very useful feature. You can use it to solve for optimization problems such as
maximizing profit, minimizing cost, maximizing expected return on the portfolio, minimizing risk,
allocating resources among different uses, allocating advertising expenditures among different
sources to maximize revenue, quantities of output the firm should produce to maximize profit
given its constraints, and much more. It solves linear and non-linear equations.
Add Excel Sovler to your worksheet as follows:
1. Click on File, Options

BUS598 Excel Functions Handout

Prepared by Fatma Abdel-Raouf
July 2012
Page 33 of 46

2. Click on Add-Ins

3. Click on Go next to Excel Add-ins.

BUS598 Excel Functions Handout

Prepared by Fatma Abdel-Raouf
July 2012
Page 34 of 46

4. Check the Solver Add-in box. You may want to go ahead and check the Analysis ToolPak
and ToolPak VBA, and click OK.

Once it is added, click on the Data tab, Analysis group and you will see the Solver icon.

To use Solver, three things need to be defined:

1. Target Cell: This is the cell that has your objective function or the function you want to
solve, either maximizing it, minimizing it, or set it equal to specific value. This goes in your
Set Objective field.
2. Changing Cells: These are the cells that Excel changes to optimize the target cell (i.e.,
solve for your objective function). These cells go in the By Changing Variable Cells field.
3. Constraints: These are the constraints you have on your optimization, which are applied
to the changing cells. The constraints go in Subject to the Constraints filed by clicking on
the Add button.

BUS598 Excel Functions Handout

Prepared by Fatma Abdel-Raouf
July 2012
Page 35 of 46

Example 1: Linear Programming:

A personal computer manufacturer produces two versions of its desktop computer - the standard
version with 80-gigabyte hard drive and rewritable DVD drive, and the economy version with 40gigabyte hard drive and rewritable CD drive. The prices, variable costs, and units produced are
as follows:

Price
Variable Cost
# of Units
Produced

Standard
PC
$1,600

Economy
PC
$1,000

1,100

700

500

300

The manufacturer has a few constraints:

- A maximum weekly outputs of 200 DVD drives and 20,000 gigabytes of hard drive capacity.
- The manufacturer assembles computers using a 50-person labor force that supplies 2,000 hours
of labor per week.
Both models require about the same assembly time of about 5 labor hours each.
How many computers of each version should the manufacturer produce in order to maximize its
profit?
(Source: Samuelson and Marks (2012) Managerial Economics. 7 th Edition. Wiley)
Answer:
The manufacturer needs to determine the number of standard PC (S) and the number of
economy PC (E) to maximize its profit (). The objective function is = 500 S + 300 E. The goal
is to maximize this function subject to the manufacturer constraints, are:
S 200
80 S + 40 E 20,000
5 S + 5 E 2,000.
1. On the spreadsheet, put any number for S and E (say 1 and 2) and define the profit
function as 500*S+300*E (in cell B12).

BUS598 Excel Functions Handout

Prepared by Fatma Abdel-Raouf
July 2012
Page 36 of 46

2. Define your constraints.

BUS598 Excel Functions Handout

Prepared by Fatma Abdel-Raouf
July 2012
Page 37 of 46

3. Click on Solver, in the Set Objective field, click on the cell that has the formula for profit,
cell B12. In the To field, check Max .

BUS598 Excel Functions Handout

Prepared by Fatma Abdel-Raouf
July 2012
Page 38 of 46

4. In the By Changing Variable Cells click on the cells that has the numbers for S and E,
cells B10:B11.

5. In Subject to the Constraints click on Add button.

BUS598 Excel Functions Handout

Prepared by Fatma Abdel-Raouf
July 2012
Page 39 of 46

6. In cell reference, click on cell B10 (to choose S), in the next field, choose <=, in the
Constraint field put 200.

7. Click Add, and start your second constraint: In cell reference, click on cell B15, next field
<=, constraint field type 20,000.

8. Click Add, and start your third constraint: In cell reference, click on cell B16, next field <=,
constraint field type 2,000.

9. Click OK.

BUS598 Excel Functions Handout

Prepared by Fatma Abdel-Raouf
July 2012
Page 40 of 46

10.Now you have your optimization problem set up, click on Solve

BUS598 Excel Functions Handout

Prepared by Fatma Abdel-Raouf
July 2012
Page 41 of 46

Solver already solved for S and E and put the answer in the proper cells. S should be 100 and E
300. This gives the manufacturer a profit of $140,000. Notice that your constraints are satisfied
as well. To accept the answer, click on Ok.
You can also add as a constraint that S and E are integers since you cant produce a fraction of a
computer.

Example 2:
The Stock Corporation makes two products, paper and cardboard. The relationship between

the firms annual profit (in thousands of dollars), and its output of each good is:

= -50 + 40 Q1 + 30 Q2 5

Q21

-4

Q22 - 3 Q1 Q2

Where Q1 is the firms annual output of paper (in tons) and Q 2 is the firms annual output of
cardboard (in tons). Find the output of each good that the Stock Corporation should produce if it
BUS598 Excel Functions Handout
Prepared by Fatma Abdel-Raouf
July 2012
Page 42 of 46

wants to maximize profit.

(Source: Allen, Doherty, Weigelt, and Mansfield (2004) Managerial Economics: Theory,
Application and Cases 6th Edition. Norton)
Answer:
This is a maximization problem with no constraints.
1. On the spreadsheet, put any number for Q1 and Q2 (say 1 and 2) and define the profit
function as
-50+40*Q1+30*Q2-5*Q1^2-4*Q2^2-3*Q1*Q2 (in cell B15).

2. Click on Solver and fill in the fields

BUS598 Excel Functions Handout

Prepared by Fatma Abdel-Raouf
July 2012
Page 43 of 46

3. Click on Solve

Your answer is 3.24 tons of paper and 2.54 tons of cardboard. Stock Corporations profit is
$52,817.
BUS598 Excel Functions Handout
Prepared by Fatma Abdel-Raouf
July 2012
Page 44 of 46

BUS598 Excel Functions Handout

Prepared by Fatma Abdel-Raouf
July 2012
Page 45 of 46

References
Cronan, John (2010). Microsoft Office Excel 2010 Quick Steps. 2 nd Edition. McGraw Hill.
Etheridge, Denise (2007). Microsoft Office: Excel 2007 Data Analysis. Wiley Publishing.
Frye, Curtis (2010). Microsoft Excel 2010 Step by Step. Microsoft Press.
Frye, Curtis (2010). Microsoft Excel 2010 Plain and Simple. Microsoft Press.
Jelen, Bill (2010). Microsoft Excel 2010 in Depth. 1 st Edition. Que.

BUS598 Excel Functions Handout

Prepared by Fatma Abdel-Raouf
July 2012
Page 46 of 46