Posted: March 4th, 2015

Finance (Analysis) 206 (301337 Finance Analysis 506)

Finance (Analysis) 206 (301337 Finance Analysis 506)

Currently you are “donating” your machine at the end of the project, and this donation is tax-deductible. However, because the book value is zero, this is essentially meaningless. BUT, is your model flexible enough that if at the end of the project your machine has a positive book value (which will result in a tax credit if donated) it can account for the changes in tax.
Also: what happens if your project life is 5 years, but I change the depreciable life to 10 years or 3 years. Can your model deal with these changes?!?

Relationship between variables.

At the moment you have set variable relationships ($20 increase in price results in a 50K decrease in units sold). But, again is your model flexible enough that if this relationship changes, can it be updated without “stuffing up” your model.

You are essentially designing a model for OTHER people to use! this means that if you give it to someone who knows very little about excel and capital budgeting they should be able to change “input variables” without “stuffing up” your model, and they should be able to follow the logic of your model (calculations) without too much trouble to a section that contains the OUTPUT information for them (your manager) to be able to analyze.
Generally models should have at least 3 sections (some of these may overlap, as all models with be slightly different)
Input
Calculation
Output
Indicate where and which variables can be changed by the user and which cells should NOT be touched by the user. Perhaps colour coding cells.

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