Overview
This lecture explains how to use Excel's What-If Analysis Data Table feature to simulate different financial scenarios, specifically for retirement savings calculations.
Setting Up a Retirement Savings Calculation
- To calculate future retirement savings, use the FV (Future Value) function in Excel.
- Convert annual interest rates to monthly by dividing by 12, as contributions are monthly.
- Multiply the number of years by 12 to get total monthly periods.
- Enter payments as negative numbers to represent cash outflow.
- Optional FV arguments include present value and payment timing; defaults are sufficient for basic calculations.
Using What-If Analysis Data Table (Single Variable)
- The Data Table feature lets you simulate how results change based on varying one input, like interest rates.
- Set up a "prototype" formula referencing your variables.
- List your variable values (e.g., interest rates) in a column.
- Reference your prototype formula beside these values.
- Highlight the table area, go to Data > What-If Analysis > Data Table.
- Use the "Column Input Cell" if your variables are listed vertically; select the original input cell linked to the variable.
- Results fill in automatically, showing how outcomes change with different inputs.
Using a Data Table for Two Variables
- You can simulate two variables at once (e.g., interest rates and years).
- List one variable vertically and the other horizontally, with the prototype formula in the corner.
- Highlight the whole table, open Data Table, and assign appropriate row and column input cells as per your table layout.
- Results show all combinations of the two variables.
Formatting and Performance Tips
- You can hide the prototype formula by changing its font color or applying custom formatting (like adding an emoji).
- Data Tables use arrays, so individual cell edits are not permitted.
- Frequent recalculation can slow your spreadsheet; switch to "Automatic Except for Data Tables" under Formula Calculation Options to prevent this.
- Press F9 to manually recalculate data tables when needed.
Key Terms & Definitions
- Data Table — An Excel tool that automates recalculations for various input values across one or two variables.
- FV Function — Calculates the future value of an investment based on periodic payments and interest rates.
- What-If Analysis — Excel feature for simulating how different inputs affect a formula's output.
Action Items / Next Steps
- Practice creating single and two-variable data tables in Excel.
- Experiment with formatting options to present results clearly.
- Adjust calculation options for large spreadsheets to improve speed.