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Software ==>	Excel (113 exercises)
Topic ==>	Scenarios (2 exercises)
Level ==>	Average difficulty
Subject ==>	Excel training

Create 3 scenarios for an investment appraisal, and a summary showing the NPV/IRR for each

This exercise is provided to allow potential course delegates to choose the correct Wise Owl Microsoft training course, and may not be reproduced in whole or in part in any format without the prior written consent of Wise Owl.

Before you can do this exercise, you'll need to download and unzip this file .

Open the file in the above folder. This shows an investment appraisal model for a friend's business venture, in which you put in £40,000 at the end of year 1 and receive £10,000 back for 7 subsequent years. At a discount rate of 8%, the Net Present Value of the investment is £11,170.

Create formulae which bring the NPV and IRR onto the inputs sheet (this is necessary because a scenario can not change cells on one sheet and compare results cells from a different sheet):

Give your two cells range names as shown.

Create the following 4 scenarios:

Scenario name	What it involves
Base case	The current figures for all input cells (apart from the date)
Smaller dividends	The income for the 7 subsequent years is only £9.000 per year
Higher initial investment	The original amount invested is £60,000, not £40,000
Interest rate rise	The discount rate is 10% and not 8%

Which of these scenarios would produce the lowest NPV, do you think?

It's always a good idea to create a base case scenario, as you can choose to show it to revert to your original input assumptions if you by mistake switch to a different scenario.

Create a summary report showing the NPV and IRR for each scenario: