Deck 2: Introduction to Spreadsheet Modeling

Question 1

The NPV function takes two arguments; the discount rate and the number of time periods in the model.

Answer 1

False

Question 2

Much of the power of spreadsheet models derives from their flexibility.

Answer 2

True

Question 3

Many models are built for the purpose of permitting experimentation with various scenarios.

Answer 3

True

Question 4

Goal Seek is a means for answering a large number of what-if questions quickly and easily.

Question 5

Which of the following is a useful tool for investigating what-if questions

A) Data tables 
B) VLOOKUP function 
C) Formula auditing 
D) SUMPRODUCT function

Question 6

The Excel tool for solving one equation with one unknown is:

A) Solver 
B) Goal Seek 
C) Trend function 
D) NPV function

Question 7

In Excel terminology,the unknown value used in Goal Seek is called the input cell.

Question 8

Which of the following is a useful tool for understanding and troubleshooting a spreadsheet model

A) Data tables 
B) VLOOKUP function 
C) Formula auditing 
D) SUMPRODUCT function

Question 9

An important property of the exponential function is that:

A) if x changes by 1 unit, then y changes by a constant percentage that is approximately equal to the model constant b times 100% 
B) if x changes by 1 unit, then y changes by a constant percentage that is approximately equal to the model constant b% 
C) if x changes by 1%, then y changes by a constant percentage that is approximately equal to the model constant b times 100% 
D) if x changes by 1%, then y changes by a constant percentage that is approximately equal to the model constant b%

Question 10

A shortcut for establishing absolute references is pressing the F9 key.

Question 11

In general,any cash flow occurring at the beginning of the first time period must be placed outside the NPV function.

Question 12

Estimating the relationships between variables in a spreadsheet model can be done using:

A) data tables 
B) Goal Seek 
C) the VLOOKUP function 
D) curve fitting

Question 13

Trace Dependents and Trace Precedents are Formula Auditing commands.

Question 14

Which of the following is not one of the features that can improve the readability of a spreadsheet model

A) Formatting features 
B) Data tables 
C) Cell comments 
D) Text Boxes

Question 15

Which of the following is not one of the required arguments for a VLOOKUP function

A) The lookup table range 
B) The value you want to compare to the values in the left column of the table 
C) The index of the column you want the returned value to come from 
D) TRUE (for an approximate match) or FALSE (for an exact match)

Question 16

To evaluate which of a set of curves fits the data best,we can use:

A) APE 
B) MAPE 
C) R2 
D) NPV

Question 17

The HLOOKUP function works exactly the same as the VLOOKUP function,except the lookup table is arranged in columns instead of rows.

Question 18

A chart is typically much more informative to a business manager than the table of numbers it is based on.

Question 19

Which of the following is not one of the components of most mathematical models

A) Inputs 
B) Outputs 
C) Decision variables 
D) None of these options

Question 20

Which of the following is not one of the types of curve fitting models available in Excel's Trendline tool

A) Exponential 
B) Linear 
C) Interpolation 
D) Power

Question 21

Exhibit 2-1
A t-shirt company is planning a production run for an event where the attendance (and thus demand for t-shirts) is uncertain. The event planners have indicated that they think the attendance will be 500, 750 or 1000, with probabilities of 30%, 50% and 20% respectively. The company must pre-order the blank t-shirts (cost=$5 per shirt) and it can sell finished shirts for $12 apiece. Any finished shirts that cannot be sold at the event can be sold for $2 apiece to a used clothing vendor.
Refer to Exhibit 2-1.What are the two possible cases for the amount of t-shirts that will be sold to the used clothing vendor
How would you calculate this amount in a spreadsheet model

Question 22

Exhibit 2-2
A small sporting goods company is considering investing $2000 in a project at the start of year 1 that will produce volleyballs over the next five years. The company plans to produce and sell 200 volleyballs in the first year, and expects that volume to grow by 10% each year thereafter. The unit selling price forecast the company has developed is $20 in year 1, $22 in year 2, $25 in year 3, $28 in year 4, and $31.50 in year 5. Variable costs are forecast to be $15 per unit produced, and there will be a fixed overhead cost in each year of $500.  (Unless otherwise indicated, assume that all cash flows occur at the end of the year.)
Refer to Exhibit 2-2.Suppose instead that the company thinks it can reduce its variable cost rate.What rate would produce an NPV of $10,000

Question 23

Exhibit 2-2
A small sporting goods company is considering investing $2000 in a project at the start of year 1 that will produce volleyballs over the next five years. The company plans to produce and sell 200 volleyballs in the first year, and expects that volume to grow by 10% each year thereafter. The unit selling price forecast the company has developed is $20 in year 1, $22 in year 2, $25 in year 3, $28 in year 4, and $31.50 in year 5. Variable costs are forecast to be $15 per unit produced, and there will be a fixed overhead cost in each year of $500.  (Unless otherwise indicated, assume that all cash flows occur at the end of the year.)
[Part 1] Refer to Exhibit 2-2.Use the graphing function in Excel to construct a scatterplot of forecasted price versus time,and fit a linear trendline to the data.What are the coefficients of the linear model,and what is the MAPE of a linear model forecast,compared to the company's forecast

Question 24

Exhibit 2-2
A small sporting goods company is considering investing $2000 in a project at the start of year 1 that will produce volleyballs over the next five years. The company plans to produce and sell 200 volleyballs in the first year, and expects that volume to grow by 10% each year thereafter. The unit selling price forecast the company has developed is $20 in year 1, $22 in year 2, $25 in year 3, $28 in year 4, and $31.50 in year 5. Variable costs are forecast to be $15 per unit produced, and there will be a fixed overhead cost in each year of $500.  (Unless otherwise indicated, assume that all cash flows occur at the end of the year.)
[Part 2] Refer to Exhibit 2-2.Use the same scatterplot constructed for the previous question,fit an exponential trendline to the data.What are the coefficients of the exponential model,and what is the MAPE of an exponential model forecast,compared to the company's forecast

Question 25

Exhibit 2-2
A small sporting goods company is considering investing $2000 in a project at the start of year 1 that will produce volleyballs over the next five years. The company plans to produce and sell 200 volleyballs in the first year, and expects that volume to grow by 10% each year thereafter. The unit selling price forecast the company has developed is $20 in year 1, $22 in year 2, $25 in year 3, $28 in year 4, and $31.50 in year 5. Variable costs are forecast to be $15 per unit produced, and there will be a fixed overhead cost in each year of $500.  (Unless otherwise indicated, assume that all cash flows occur at the end of the year.)
Refer to Exhibit 2-2.Use the above information to develop a simple cash flow proforma sheet,and then apply Excel's NPV function to calculate the project value assuming a 10% discount rate.What is your answer

Question 26

Exhibit 2-1
A t-shirt company is planning a production run for an event where the attendance (and thus demand for t-shirts) is uncertain. The event planners have indicated that they think the attendance will be 500, 750 or 1000, with probabilities of 30%, 50% and 20% respectively. The company must pre-order the blank t-shirts (cost=$5 per shirt) and it can sell finished shirts for $12 apiece. Any finished shirts that cannot be sold at the event can be sold for $2 apiece to a used clothing vendor.
Refer to Exhibit 2-1.Suppose now that blank t-shirts can only be ordered from the wholesale vendor in batches of 50
How many t-shirts should the company order

Question 27

Exhibit 2-2
A small sporting goods company is considering investing $2000 in a project at the start of year 1 that will produce volleyballs over the next five years. The company plans to produce and sell 200 volleyballs in the first year, and expects that volume to grow by 10% each year thereafter. The unit selling price forecast the company has developed is $20 in year 1, $22 in year 2, $25 in year 3, $28 in year 4, and $31.50 in year 5. Variable costs are forecast to be $15 per unit produced, and there will be a fixed overhead cost in each year of $500.  (Unless otherwise indicated, assume that all cash flows occur at the end of the year.)
Refer to Exhibit 2-2.Suppose the company thinks it may be able to produce and sell more than currently planned.What growth rate of production would produce an NPV of $10,000

Question 28

Exhibit 2-1
A t-shirt company is planning a production run for an event where the attendance (and thus demand for t-shirts) is uncertain. The event planners have indicated that they think the attendance will be 500, 750 or 1000, with probabilities of 30%, 50% and 20% respectively. The company must pre-order the blank t-shirts (cost=$5 per shirt) and it can sell finished shirts for $12 apiece. Any finished shirts that cannot be sold at the event can be sold for $2 apiece to a used clothing vendor.
Refer to Exhibit 2-1.What Excel function is useful for calculating the expected value of demand for t-shirts
What is the expected demand

Question 29

Exhibit 2-1
A t-shirt company is planning a production run for an event where the attendance (and thus demand for t-shirts) is uncertain. The event planners have indicated that they think the attendance will be 500, 750 or 1000, with probabilities of 30%, 50% and 20% respectively. The company must pre-order the blank t-shirts (cost=$5 per shirt) and it can sell finished shirts for $12 apiece. Any finished shirts that cannot be sold at the event can be sold for $2 apiece to a used clothing vendor.
Refer to Exhibit 2-1.What Excel function is useful for calculating revenue
Explain why it is useful.

Question 30

Exhibit 2-1
A t-shirt company is planning a production run for an event where the attendance (and thus demand for t-shirts) is uncertain. The event planners have indicated that they think the attendance will be 500, 750 or 1000, with probabilities of 30%, 50% and 20% respectively. The company must pre-order the blank t-shirts (cost=$5 per shirt) and it can sell finished shirts for $12 apiece. Any finished shirts that cannot be sold at the event can be sold for $2 apiece to a used clothing vendor.
Refer to Exhibit 2-1.Suppose that blank t-shirts can only be ordered from the wholesale vendor in batches of 100
How many t-shirts should the company order