Sensitivity Analysis

A systematic way of asking “what-if” scenario questions in order to understand what outcomes could possibly occur that would

affect your decision which input assumptions will have the most impact

on your decision and should be analyzed further Performed by setting all inputs equal to their

base values and changing one variable’s value at a time

Spreadsheet Data Tables

Data Table 1 allows you to change one input variable value at a time and record the impact that the input assumption has on selected outputs.

Data Table 2 allows you to change two input variable values simultaneously and record the impact that the input assumptions have on one output.

Setting Up Data Table 1 for an Input Layout the table on the worksheet that has the

input assumption cell. The first column of the table should contain possible

values for the input assumption. Leave the top cell in the first column blank or filled with a label that documents the input being analyzed.

Starting in the second column, enter formulas in the first row of the table that link to key output cells in the model. Each column represents an output variable for which data will eventually be collected.

The table that is defined by the first column and first row is an array that will be filled in when you complete the Data Table menu option.

Recording the Data Table 1 Values

Highlight the entire data table array! Go to the Data ribbon, Data Tool category, What-if

Analysis submenu and select Data Tables. Fill in the Table dialog box by entering the cell address

for the input assumption into the Column Input Cell box. Click OK.

Excel will systematically place one value from the first column into the address you specified in the Table dialog box. It will then record the observed values for the output variable cells identified in row 1 into the corresponding row and column. It will repeat this until all values in column 1 have been tested.

Modifying the Data Table Array

The Table{ } array function will be visible inside each cell of the data table. To remove the results and formulas, you must select the entire array and press delete.

The Table{ } array function in the cells make the table dynamic to new scenarios that you may want to test: change the entries in the first column or formulas in the first row and the table will automatically update with the new observed results!

Input Variable Values

Worst Case –vs- Most Likely Case –vs- Best Case scenarios (3 rows in the table structure)

10%, 20%, 30% +/- around the base value (i.e. 70-90% or 110-130% of the base value)

Do not put formulas in column 1 that refer directly or indirectly to the input assumption cell that you will enter in the Table dialog box. This will create a circular reference and give you garbage in your table results (without showing an error message!)

Setting Up Data Table 2 for an Output Layout the table on the worksheet that has the two

input assumption cells. The first column of the table should contain possible

values for the first input assumption. Starting in the second column, the first row of the table should contain possible values for the second input assumption.

In the top cell of the first column, enter a formula that links to the key output cell being studied. Each cell in the table will be filled with the value for this output that is associated with the respective column/row input assumptions once the Data Table menu option is run.

Recording the Data Table 2 Values

Highlight the entire data table array! Go to the Data ribbon, Data Tool category, What-if

Analysis submenu and select Data Tables. Fill in the Table dialog box by entering the cell address

for the first input assumption into the Column Input Cell box. Enter the cell address for the second input assumption into the Row Input Cell box. Click OK.

Excel will systematically place the values from the first column and row into the respective addresses you specified in the Table dialog box. In the table cell associated with these column/row headings, the value for the output variable that was identified in the top left cell of the table will be recorded.