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Chapter 2. Analyzing Data with Excel > Performing a What-If Analysis

Performing a What-If Analysis

What-if analysis is perhaps the most basic method for understanding worksheet data. With what-if analysis, you first calculate a formula D, based on the input from variables A, B, and C. You then say, “What if I change variable A? Or B or C? Or all three? What happens to the result?”

For example, Figure 2.1 shows a worksheet that calculates the monthly payment for a loan or mortgage based on three variables: the interest rate, the term, and the initial principal. Cell C8 shows the result of the PMT() function. Now the questions begin: What if the interest rate is 8%? What if the term is 25 years? What if the principal is $125,000? Or $150,000? Answering these questions is a straightforward matter of changing the appropriate variables and watching the effect on the result.


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