Download AGB 260: Agribusiness Information Technology

AGB 260:
Agribusiness Data
Literacy
Business Modeling and Analysis
Useful Chapters in the Textbook
Regarding this Lecture

Chapter 35

Chapter 36

Chapter 37

Appendix
Important Finance ConceptFuture Value

Problem: Suppose you want to find
the sum that a present amount of
money will grow to by the end of the
nth interest period.

Formula: FVn = PV(1 + r)n

Where FVn = future sum to be received at the
end of n periods

PV = present amount

r = compound interest rate and

n = number of periods.
Important Finance ConceptPresent Value

Problem: Suppose you wanted to
know what is the present value of a
sum to be received in the future?
 Formula:
PV = FV/(1 + r)n
 Where
PV = the current value of a future
amount at the end of n periods
 FV
= future amount
r
= compound interest rate and
n
= number of periods.
Important Finance Functions

FV(rate,nper,pmt,[pv],[type])
 This
function tells you what the future
value of a set of payments are and/or
the future value of an initial lump sum
 Rate
 Nper
is the compounding interest rate.
is the total number of payment
periods.
Important Finance Functions
Cont.
 Pmt
is the periodic payments you will
receive.
 Pv is the current value of the
investment and is an optional
argument.
 Type
is an optional argument where a 0
represents a payment at the beginning
of the period and 1 represents the
payment being received at the end of
the period.
Important Finance Functions
Cont.

PV(rate,nper,pmt,[fv],[type])
 This
function tells you what the
present value of a set of payments are
and/or the present value of a lump
sum receive in year n
 Rate
 Nper
is the compounding interest rate.
is the total number of payment
periods.
Important Finance Functions
Cont.
 Pmt
is the periodic payments you will
receive.
 Pv is the current value of the
investment and is an optional
argument.
 Type
is an optional argument where a 0
represents a payment at the beginning
of the period and 1 represents the
payment being received at the end of
the period.
Important Finance Functions
Cont.

NPV(rate,value1,[value2],…)

This calculate the net present value of a
stream of returns starting at year 1.

This function is similar to the PV() function
except that it can handle different
payments.

Rate is the one period discounting factor.

Value1 is the net return you receive in
year 1.
Important Finance Functions
Cont.
 This
function assumes that your
returns are equally spaced.
 Suppose
you want to know what
it is worth for you today to
receive 1,000,000 over the next
20 years.
Important Finance Functions
Cont.

IRR(values,[guess])

IRR returns the internal rate of return of a
series of cash flows.

This represents the interest rates that gives
you a net present value of 0.

Values represents the different cash flows over
the periods.

Guess is an optional argument that represents
a starting rate that you want the function to
start with.
Important Statistical
Functions for Simulation


RAND()

This function calculates a random number from 0 to
1 which is uniformly distributed.

This random number generator can be used to do
simulation of random events using Excel.
NORM.DIST(x,mean,standard_dev,cumulative)

This function returns what is the probability density
or cumulative probability of event x occurring given
a mean and a standard deviation for a normally
distributed variable.
Important Statistical Functions
for Simulation Cont.

NORM.S.DIST(z,cumulative)


This function returns what is the probability
density or cumulative probability of event z
occurring for a standard normally distributed
variable.
NORM.INV(probability,mean,standard_dev)

Returns the inverse of the normal cumulative
distribution given a probability, a mean, and a
standard deviation.

This function coupled with RAND() can generate
normally distributed random numbers.
Important Statistical Functions
for Simulation Cont.

NORM.S.INV(probability)

Returns the inverse of the standard normal
cumulative distribution given a probability.
What-If Analysis

Excel has the ability to examine
different scenarios that can occur
using its What-If analysis tools

These tools include:
 Scenario
Manager
 Goal
Seek
 Data
Table
Scenario Manager

Scenario Manager allows you to see what
happens to result cells if you change
different parameters within your
spreadsheet model.

This tool is very useful when you want to
examine more than two changes occurring
at once or you want to keep track of
multiple cells that could change due to
the different scenarios.
Goal Seek

Goal Seek is a tool in Excel that can help
you find values that will meet a specific
goal in your spreadsheet.

Goal Seek has three inputs:

Set Cell

To Value

By changing cells
Data Table

Data Table is a tool in Excel that can
methodically change one or two cells in
your spreadsheet and report a value due
to those changes.

It is an excellent tool for making
contingency tables for one or two
variables.

Data Table has two inputs:

Row input cell

Column input cell
Solver

Solver is an add-in tool that does linear
and non-linear optimization potentially
given a set of constraints.

Solver has four sets of information that
needs to be entered into it:

Set Objective

To

By changing variable cells

Subject to the constraints

Select solving method
Data Analysis Add-In


Excel has a Data Analysis add-in that allows you to
do many different types of preprogrammed
statistical analysis including:

Regression

Descriptive Statistics

Histograms

Different testing of means

Moving average
Much of this analysis can be done with the
standard Excel functions.