Spreadsheet Models for Managers


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If Spreadsheet Models for Managersyou use Excel to model businesses, business processes, or business transactions, this course will change your life. You’ll learn how to create tools for yourself that will amaze even you. Unrestricted use of this material is available in two ways.

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Spreadsheet Models for Managers

Session 9
Capital Leases I
Summary of Pages

To model capital leases, we must understand the interplay between the lease term, the interest rate, and the number and frequency of payments. Excel offers several worksheet functions that implement the underlying formulas that express these connections.

The worksheet functions we’ll explore relate to computing present value and future value, and payments for a loan based on constant payments and constant interest rates. These constancy conditions are troublesome in real life, because interest rates and payments do vary in many loan structures.

In this session, we’ll thoroughly explore the use of these facilities, not only in the straightforward situations that one usually encounters, but also in the more complex arrangements that arise when payments or interest rates are non-uniform. Sadly, these situations are more common than we often suppose, so it pays to know how to handle them.

Reminder: on this date, at , your Project Midpoint Status Report and Excel Capability Request are due.

Below is a summary of pages for Session 9.

  1. Review of Last Time
  2. Capital leases
  3. Present and future value
  4. Future value
  5. Future value in Excel
  6. Future value in Excel (continued)
  7. Future value examples
  8. Non-uniform future value
  9. Present value
  10. Present value in Excel
  11. Present value examples
  12. Non-uniform present value
  13. Calculating payments
  14. Payment calculation examples
  15. The main points
  16. Reference readings
  17. Preview of Next Time

Links to other materials for Session 9.

Last Modified: Wednesday, 17-Sep-2014 05:04:12 EDT

Nesting Worksheet Function Calls

Nesting invocations of worksheet functions can be a bit tricky, because nested function calls are difficult to think about. Sometimes, in developing a spreadsheet model, we can gain clarity by avoiding nesting. That is, while we’re still thinking about how to approach a modeling problem, we intentionally choose to avoid nesting function calls. After we understand the problem better — and only then — we might go back and replace what we’ve done with a more compact version that exploits nesting. In addition to producing forms that are easier to think about, this practice of developing a simpler form first has another benefit. It enables us to examine intermediate values more easily, which enables us to confirm that the calculations we’re performing make sense.

Some feel that building something that you intend to replace is a waste of effort — that it’s far easier to build things in final form from the start. When that approach works, it is faster and more efficient. But when we think we’re likely to make mistakes, the “slower” way is faster.

Do You Know What a Dynamic Model Is?

In years past, we’ve learned that what makes a model dynamic — as opposed to static — can be difficult to grasp. If you have some doubts yourself, and you haven’t yet looked at the reading on Models vs. Tools, we believe that you will find it helpful.