“Ovidius” University Annals, Economic Sciences Series

Volume XVIII, Issue 2 /2018

What-If Analysis Tools in Excel

Cosma Emil
"Ovidius" University of Constanta, Faculty of Economic Sciences
[email protected]

Abstract

What-If Analysis tools are available in Excel and they can be used for a variety of purposes.
This paper is concerned with their description, as well as a few examples of their applications in
financial models. For this reason, two types of data tables are taken into account: one-variable
data tables and two-variable data tables. We will look at how these can be structured in order to
show us the effect that a loan could have on our yearly budget, by experimenting with different
values for the interest rate and total number of payments. We will also employ the use of PMT and
IPMT functions.

Key words: analysis, table, pmt, ipmt.

J.E.L. classification: C3

1. Introduction

When a formula already exists, Data Tables help us see how it is affected by variables (in this
case, we will use one or two variables). So, suppose that we have a formula in which one or two
variables were included, or perhaps a larger number of formulas that have one variable in common.
A What-If Analysis Data Table would make it easy for us to analyze a variety of possible
outcomes, as they are all gathered in one place, in the form of a table, which is straightforward and
readable. Moreover, data can be continuously updated. As long as the workbook enables automatic
recalculations, the results will be updated as well.

2. Theoretical background. Generating a Data Table

Tables retrieve input data from rows and columns, use them in formulas and then display them in
tabular form. The main idea behind their design is represented by defining a formula which is only
written once, but applied multiple times. In order to create a two variables data table, you have to
execute the following steps:
a. You apply the formula for two variables (I 1 and I 2 ), located in two cells (the row input cell
and the column input cell respectively):
Figure no. 1. Screenshot

I1 I2

Formula  V1 

Results
V2


Source: (Weterings, Excel Easy)

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b. Fill in the input values, for which the same formula is applied, thus:
• on the right of the formula, on the same row: input values V 1 of type I 1 ;
• under the formula, on the same column: input values V 2 of type I 2 ;
c. Select the cells which will make up the table (the selection begins with the formula and it
includes input values V 1 and V 2 );
d. On the Data tab, click on What-If Analysis, option Data Table;
e. In the Data Table window, fill in Row input cell and Column input cell – the addresses of the
input cells for rows and columns (they include values I 1 and I 2 ).
3. Data table basics

Create either one-variable or two-variable data tables, depending on the number of variables and
formulas that you need to test.
Example: Calculate the expression a+2*b b for different values of a and b (Figures no. 2 – 6).
a) In two cells type the input values (for example 4 and 3) and reference the input cells as a
and b, respectively:

Figure no. 2. Screenshot

Source: (Cosma E., 2018)

b) In a different cell on the worksheet, enter the formula that refers to the two input cells,
a, b (=a+2*b):
Figure no. 3. Screenshot

Source: (Cosma E., 2018)

c) Type one list of input values for a in the same row as the formula, to its right, in this case
a(4, 2, 8), and the second list of input values for b in the same column, below the formula
b(13,5, 12,5):
Figure no. 4. Screenshot

Source: (Cosma E., 2018)

d) Select the range of cells that contains the formula, both the row and column of values
(B3:D5 and A2:A5), and the cells in which you want the calculated values (A3:D5). On
the Data tab, in the Data Tools group, click on What-If Analysis  Data Table and
complete the Dialog Box which appears, containing the Row input cell and Column

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Volume XVIII, Issue 2 /2018

input cell boxes (a – the row input cell, for values of type a; b – the column input cell,
for values of type b). Click .

Figure no. 5. Screenshot

Source: (Cosma E., 2018)

e) The table displays the output values derived according to the formula – {=Table(C1;D1)}:
Figure no. 6. Screenshot

Source: (Cosma E., 2018)

4. What-If Analysis for financial modeling

What-If Analysis has numerous applications in finance (for instance, Rate – Interest rate and
Nper – Number of payments)

4.1. Two-variable data tables

In the following example we use a data table to vary the interest rate and term length that are
used in a loan to determine possible monthly payment amounts (Figures no. 7).
Example: Suppose that we have a $32,000 loan over a period of 5 years, with an annual interest
rate of 10%. We would like to see how the values for monthly payments would change for
different total numbers of payments (in this case, 3, 6, and 4 years) and for different values of
the annual interest rate (keeping in mind that 11% is the maximum value).

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Volume XVIII, Issue 2 /2018

Figure no. 7. Screenshot

Source: (Microsoft, Excel - Office Support)

• Create a two-variable Data Table (as explained before);

• D4 is the row input cell and D5 is the column input cell;
• We will use the PMT function for the formula in cell B8 - type in the arguments of
the function (=PMT(D5/12;D4*12;D3).

4.2. One-variable data tables

One-variable Data Tables are a particular case of two-variable Data Tables - explained before
(Figures no. 8 - 11).
Example: Suppose that we have a $32,000 loan over a period of 5 years, with an annual interest
rate of 10%. We would like to see how the values for monthly payments would change for
different values of the annual interest rate (keeping in mind that 11% is the maximum value).
We will also calculate the interest payment for each case.
a) Create a spreadsheet similar to the one in the image below (cells D3, D4, D5 contain
data of numeric data types):
Figure no. 8. Screenshot

Source: (Cosma E., 2018)

b) In cells C8 and D8, write the desired formulas using the PMT and IPMT functions:
=PMT(D5/12;D4*12;D3) , =IPMT(D5/12;D4*12;D4*12;D3):

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Volume XVIII, Issue 2 /2018

Figure no.9. Screenshot

Source: (Cosma E., 2018)

c) Select the data table, the cells ranging from B8:D14 (it contains the two cells in which
the two formulas were typed and the interest rate column). We have only one input
cell, on the column (D5):
Figure no. 10. Screenshot

Source: (Cosma E., 2018)

d) Click The following values are displayed:

Figure no. 11. Screenshot

Source: (Cosma E., 2018)

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Volume XVIII, Issue 2 /2018

5. Conclusions

By employing the use of What-If Analysis in Excel, it is possible to explore a variety of results,
derived from distinctive sets of values included in one or more formulas. A real-life financial
situation in which What-If Analysis would prove useful is when you want to create two different
budgets, each of them based on a different level of revenue. You could try another approach as
well: perhaps you already have a resulting value, and you would like to know which input values
would lead to that result. Excel is endowed for a wide range of purposes, depending on what you
are looking to achieve.

6. References

• Cosma, E., 2018, Excel 2016, [online] Available at:

<https://onedrive.live.com/?id=1A0E73A3A86C93F%21117&cid=01A0E73A3A86C93F>
[Accessed 26.11.2018]
• Microsoft, Excel - Office Support, Calculate multiple results by using a data table [online]
Available at:<https://support.office.com/en-us/article/calculate-multiple-results-by-using-a-data-
table-e95e2487-6ca6-4413-ad12-77542a5ea50b> [Accessed 26.11.2018]
• Weterings, N., Excel Easy, Tutorial on the net, [online] Available at: <https://www.excel-easy.com>
[Accessed 26.11.2018]

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