15. Using What-If Analysis
15. Using What-If Analysis
calculations for you. One of the tools in Excel that you can use to perform
these calculations is a Data tool called what-if analysis. What-if analysis
allows you to see the effect different values have in formulas. Have you ever
thought, "What interest rate do I need to qualify for to have a car payment of
$400 on the car I want?" This question can be answered using what-if
analysis.
In this lesson, you will learn how to use a what-if analysis tool called Goal Seek.
Example
You need a loan to buy a new car. You know how much money you want to borrow, how long of a
period of time you want to take to pay off the loan (the term), and what payment you can afford to
make each month. But what you need to know is what interest rate you need to qualify for to make the
payment $400 per month. In the image below, you can see that if you didn’t have interest and just
divided this $20,000 into 60 monthly payments, you would pay $333.33 per month. The what-if
analysis tool will allow you to easily calculate the interest rate.
There are three What-If analysis tools that you can use. To access these, select the Data tab and locate
the What-If Analysis command. If you click this command, a menu with three options appears.
Goal seek is useful if you know the needed result but need to find the input value that will give you the
desired result. In this example, we know the desired result (a $400 monthly payment) and are seeking
the input value (the interest rate).
Goal Seek
Challenge!
Use the Car Loan workbook to complete this challenge.
Use Goal Seek to solve the problem described in the text and video lessons.
Create a problem of your own that you might use Goal Seek to solve. Try it.