One of the most appealing aspects of Excel is its ability to create dynamic models. A dynamic model uses formulas that instantly recalculate when you change values in cells that are used by the formulas. When you change values in cells in a systematic manner and observe the effects on specific formula cells, you’re performing a type of what-if analysis.
What-if analysis is the process of asking such questions as “What if the interest rate on the loan changes to 7.5 percent rather than 7.0 percent?” or “What if we raise our product prices by 5 percent?”
If you set up your worksheet properly, answering such questions is simply a matter of plugging in new values and observing the results of the recalculation. Excel provides useful tools to assist you in your what-if endeavors.
Figure 36.1 shows a simple worksheet model that calculates information pertaining to a mortgage loan. The worksheet is divided into two sections: the input cells and the result cells (which contain formulas).
Figure 36.1. This simple worksheet model uses four input cells to produce the results.
This workbook is available on the companion CD-ROM. The file name ...