Book Image

Hands-On Financial Modeling with Excel for Microsoft 365 - Second Edition

By : Shmuel Oluwa
Book Image

Hands-On Financial Modeling with Excel for Microsoft 365 - Second Edition

By: Shmuel Oluwa

Overview of this book

Financial modeling is a core skill required by anyone who wants to build a career in finance. Hands-On Financial Modeling with Excel for Microsoft 365 explores financial modeling terminologies with the help of Excel. Starting with the key concepts of Excel, such as formulas and functions, this updated second edition will help you to learn all about referencing frameworks and other advanced components for building financial models. As you proceed, you'll explore the advantages of Power Query, learn how to prepare a 3-statement model, inspect your financial projects, build assumptions, and analyze historical data to develop data-driven models and functional growth drivers. Next, you'll learn how to deal with iterations and provide graphical representations of ratios, before covering best practices for effective model testing. Later, you'll discover how to build a model to extract a statement of comprehensive income and financial position, and understand capital budgeting with the help of end-to-end case studies. By the end of this financial modeling Excel book, you'll have examined data from various use cases and have developed the skills you need to build financial models to extract the information required to make informed business decisions.
Table of Contents (19 chapters)
1
Part 1 – Financial Modeling Overview
4
Part 2 – The Use of Excel Features and Functions for Financial Modeling
8
Part 3 – Building an Integrated 3-Statement Financial Model with Valuation by DCF
15
Part 4 – Case Study

Case study

Wazobia Ventures Ltd is seeking your advice on whether to invest N5,000,000 on a waste recycling project that will yield the following results:

  • N300,000 in year 1
  • N1,500,000 in year 2
  • N2,000,000 in year 3
  • N2,000,000 in year 4
  • N800,000 in year 5

Wazobia's cost of capital is 9%. Management expects to recover the initial investment within 4 years.

You are to perform the following tasks:

  1. Calculate the NPV, IRR, PI, and PBP of the project.
  2. For each of these indicators, state whether the project is viable and advise management.
  3. Would your answer be different if the cost of capital was 10%?

Let's look at the solution in the following section.

Solution

In accordance with good practice, we must first make some assumptions and put them together in an assumption table:

  1. First, build an assumption table.

Figure 13.1 – Assumptions table

  1. Prepare a layout for the calculations...