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Learning Plan 3 Assessment - Essay Example
Pages 4 (1004 words)
Goal Seek is “part of a suite of commands sometimes called what-if analysis…a process of changing the values in cells to see how those…
Let’s say you are considering the purchase of a new car and you want to see how the interest rate impacts your monthly payment. The car is priced at $ 20,000, you want to finance it for five years (60 months), and the dealer is making an initial offer to you at a rate of 6% while your bank will loan you the money for 4.7%. Then, as you negotiate your deal with the car sales manager, you discover that the manufacturer is offering a rate of 2.2% if you buy the car in the next three days. As demonstrated in the chart below, the interest rate impacts the amount of money you will pay each month:
The row labeled interest rate is the value that is changed in Goal seek. After setting the formula to calculate monthly payments for the parameters described above, simply click on Tools, Goal Seek. Excel will provide a pop-up window to allow you to determine which field is to be affected by your what-if scenario. In the “set cell” field, simply click on the cell that has the payment amount in it. Skip over the “To value” section and click in the “By changing cell.” At that point, click on the cell that has the interest rate variable and click “okay.” You will then be able to change the interest rate and, each time you do so, the payment will change to show you the payment associated with the altered interest rate. In the table above, the three possible interest rates offered by the dealership, bank, and manufacturer are shown, and the corresponding payments indicate the difference the rates make. It is intuitive that the lower the interest rate the lower the payment, but the Goal Seek tool allows you to see that there is a difference of over $ 30.00 per month between the rates offered. This is just a simple example of what Goal Seek can do, and the models used by most business analysts are much more complicated than the one shown here. The advantage of Goal Seek is that it allows the ...