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Excel 2007_ Using What-If Analysis

The document provides an introduction to using What-If Analysis in Excel 2007, specifically focusing on the Goal Seek tool. It explains how to determine the interest rate needed for a specific loan payment using a step-by-step approach. Additionally, it includes a challenge for users to apply Goal Seek to their own problems.

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12 views

Excel 2007_ Using What-If Analysis

The document provides an introduction to using What-If Analysis in Excel 2007, specifically focusing on the Goal Seek tool. It explains how to determine the interest rate needed for a specific loan payment using a step-by-step approach. Additionally, it includes a challenge for users to apply Goal Seek to their own problems.

Uploaded by

wba59179
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 4

TEXTBOOK REFERENCE: Form 3, Unit 1. Pages 28-36.

Senior Secondary Computer Studies, Andrew Nasalangwa.

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All Topics Excel 2007 Using What-If Analysis

Excel 2007
Using What-If Analysis

Page 1
Introduction
The real power in Excel lies in its ability to perform multiple mathematical 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.

Page 2

What-if analysis
Watch the video! (5:18 min)

Download the example to work along with the video.

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.

Where did the formula come from?


The formula that appears in cell B5 in the example image is a function. It isn't part of the what-if analysis tool, so
you will need to understand functions thoroughly before you use what-if analysis. For the example scenario
described above, you need a formula that will calculate the monthly payment. Instead of writing the formula
yourself, you can insert a function to do the calculation for you.

To insert a payment function:


Select the Formula tab.
Click the Insert Function command. A dialog box appears.
Select PMT.
Click OK. A dialog box appears.
Insert your cursor in the first field. A description of the needed information appears at the bottom of the
dialog box.

Select the cell in the spreadsheet with the needed information.


Insert your cursor in the next field. A description about the needed information appears at the bottom of
the dialog box.
Select the cell in the spreadsheet with the needed information.
Repeat the last two steps until all of the necessary information is entered in the dialog box.
Click OK.

Page 3

What-If Analysis Tools


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

To Use Goal Seek to Determine an Interest Rate:


Select the Data tab.
Locate the Data Tools group.
Click the What-If Analysis command. A list of three options appears.
Select Goal Seek. A small dialog box appears.
Select the cell that you want to set to a specific value. In this example, we want to set B5, the Payment cell.

Insert the cursor in the next field.


Enter a value in the value field. In this example, type -$400. Since we’re making a payment that will be
subtracted from our loan amount, we have to enter the payment as a negative number.

Insert the cursor in the next field.


Select the cell that you want to change. This will be the cell that tries various input values. In this example,
select cell B4, which is the interest rate.

Click OK.
Then, click OK again. The interest rate appears in the cell. This indicates that a 7% interest rate will give us a
$400 a month payment on a $20,000 loan that is paid off over five years, or 60 months.
Page 4

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.

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