Exam 2: Introduction to Spreadsheet Modeling

Exhibit 2-2 A small sporting goods company is considering investing $2000 in a project at the start of year 1 that will produce volleyballs over the next five years. The company plans to produce and sell 200 volleyballs in the first year, and expects that volume to grow by 10% each year thereafter. The unit selling price forecast the company has developed is $20 in year 1, $22 in year 2, $25 in year 3, $28 in year 4, and $31.50 in year 5. Variable costs are forecast to be $15 per unit produced, and there will be a fixed overhead cost in each year of $500. (Unless otherwise indicated, assume that all cash flows occur at the end of the year.) -Refer to Exhibit 2-2. Use the above information to develop a simple cash flow proforma sheet, and then apply Excel's NPV function to calculate the project value assuming a 10% discount rate. What is your answer?

In Excel terminology, the unknown value used in Goal Seek is called the input cell.

Which of the following is not one of the features that can improve the readability of a spreadsheet model?

Goal Seek is a means for answering a large number of what-if questions quickly and easily.

Exhibit 2-1A t-shirt company is planning a production run for an event where the attendance (and thus demand for t-shirts) is uncertain. The event planners have indicated that they think the attendance will be 500, 750 or 1000, with probabilities of 30%, 50% and 20% respectively. The company must pre-order the blank t-shirts (cost=$5 per shirt) and it can sell finished shirts for $12 apiece. Any finished shirts that cannot be sold at the event can be sold for $2 apiece to a used clothing vendor. -Refer to Exhibit 2-1. Suppose now that blank t-shirts can only be ordered from the wholesale vendor in batches of 50? How many t-shirts should the company order?

Exhibit 2-2 A small sporting goods company is considering investing $2000 in a project at the start of year 1 that will produce volleyballs over the next five years. The company plans to produce and sell 200 volleyballs in the first year, and expects that volume to grow by 10% each year thereafter. The unit selling price forecast the company has developed is $20 in year 1, $22 in year 2, $25 in year 3, $28 in year 4, and $31.50 in year 5. Variable costs are forecast to be $15 per unit produced, and there will be a fixed overhead cost in each year of $500. (Unless otherwise indicated, assume that all cash flows occur at the end of the year.) -[Part 2] Refer to Exhibit 2-2. Use the same scatterplot constructed for the previous question, fit an exponential trendline to the data. What are the coefficients of the exponential model, and what is the MAPE of an exponential model forecast, compared to the company's forecast?

Much of the power of spreadsheet models derives from their flexibility.

A chart is typically much more informative to a business manager than the table of numbers it is based on.

Which of the following is not one of the components of a mathematical model?

Many models are built for the purpose of permitting experimentation with various scenarios.

In general, any cash flow occurring at the beginning of the first time period must be placed outside the NPV function.

A shortcut for establishing absolute references is pressing the F9 key.

To evaluate which of a set of curves fits the data best, we can use:

Exhibit 2-2 A small sporting goods company is considering investing $2000 in a project at the start of year 1 that will produce volleyballs over the next five years. The company plans to produce and sell 200 volleyballs in the first year, and expects that volume to grow by 10% each year thereafter. The unit selling price forecast the company has developed is $20 in year 1, $22 in year 2, $25 in year 3, $28 in year 4, and $31.50 in year 5. Variable costs are forecast to be $15 per unit produced, and there will be a fixed overhead cost in each year of $500. (Unless otherwise indicated, assume that all cash flows occur at the end of the year.) -Refer to Exhibit 2-2. Suppose instead that the company thinks it can reduce its variable cost rate. What rate would produce an NPV of $10,000?

Which of the following is not one of the required arguments for a VLOOKUP function?

Exhibit 2-2 A small sporting goods company is considering investing $2000 in a project at the start of year 1 that will produce volleyballs over the next five years. The company plans to produce and sell 200 volleyballs in the first year, and expects that volume to grow by 10% each year thereafter. The unit selling price forecast the company has developed is $20 in year 1, $22 in year 2, $25 in year 3, $28 in year 4, and $31.50 in year 5. Variable costs are forecast to be $15 per unit produced, and there will be a fixed overhead cost in each year of $500. (Unless otherwise indicated, assume that all cash flows occur at the end of the year.) -[Part 1] Refer to Exhibit 2-2. Use the graphing function in Excel to construct a scatterplot of forecasted price versus time, and fit a linear trendline to the data. What are the coefficients of the linear model, and what is the MAPE of a linear model forecast, compared to the company's forecast?

The Excel tool for solving one equation with one unknown is:

Exhibit 2-1A t-shirt company is planning a production run for an event where the attendance (and thus demand for t-shirts) is uncertain. The event planners have indicated that they think the attendance will be 500, 750 or 1000, with probabilities of 30%, 50% and 20% respectively. The company must pre-order the blank t-shirts (cost=$5 per shirt) and it can sell finished shirts for $12 apiece. Any finished shirts that cannot be sold at the event can be sold for $2 apiece to a used clothing vendor. -Refer to Exhibit 2-1. What Excel function is useful for calculating the expected value of demand for t-shirts? What is the expected demand?

Trace Dependents and Trace Precedents are Formula Auditing commands.

Which of the following is a useful tool for understanding and troubleshooting a spreadsheet model?