Goal Seek
Goal Seek is a What-If Analysis tool in Microsoft Excel and OpenOffice Calc that can help you
find a desired result by adjusting an input value.
It's used to find the correct input value when the output is already known.
It can be used for a variety of tasks, such as calculating a company's break-even units or
determining the interest rate a borrower needs to qualify for.
To use the Goal Seek feature in OpenOffice Calc to find the correct input value to produce a
desired result, you can do the following:
● Place the cursor in the formula cell
● Select Tools > Goal Seek
● In the Formula cell field, the correct cell will already be entered
● In the Variable cell field, place the cursor
● In the Target value field, enter the desired result of the formula
● Click OK
If you know the result that you want from a formula, but are not sure what input value the
formula needs to get that result, use the Goal Seek feature. For example, suppose that you
need to borrow some money. You know how much money you want, how long you want to
take to pay off the loan, and how much you can afford to pay each month. You can use Goal
Seek to determine what interest rate you will need to secure in order to meet your loan goal.
QUESTION 1
You are running a small business and need to set your sales target for the month. Your goal is
to determine how many units of a product you need to sell to meet your revenue target, based
on a given price per unit and fixed costs.
Given:
● Fixed costs for the month: $500 (e.g., rent, utilities, etc.)
● Price per unit: $25
● Revenue target: $3,000
Task:
Use Goal Seek in OpenOffice Calc to determine how many units of the product you need to sell
to achieve a revenue of $3,000 after covering fixed costs.
Steps to solve this using Goal Seek:
1. Set up your data: Open a new sheet in OpenOffice Calc and enter the following data:
○ In Cell A1, enter "Fixed Costs".
○ In Cell A2, enter 500 (your fixed costs).
○ In Cell B1, enter "Price per Unit".
○ In Cell B2, enter 25 (the price at which you sell your product).
○ In Cell C1, enter "Units Sold".
○ In Cell C2, enter a starting value like 10 (this will be the initial guess for the
number of units sold).
○ In Cell D1, enter "Revenue Target".
○ In Cell D2, enter 3000 (your revenue target).
2. Calculate Revenue:
○ In Cell E1, enter "Total Revenue".
○ In Cell E2, enter the formula: =B2*C2 (this calculates the total revenue based on
the price per unit and the number of units sold).
3. Set up the Goal Seek:
○ Go to the menu and select Tools → Goal Seek.
○ In the Goal Seek dialog:
■ Set "Set cell" to E2 (the total revenue cell).
■ Set "To value" to 3000 (the revenue target).
■ Set "By changing cell" to C2 (the number of units sold).
○ Click OK.
4. Interpret the Result:
○ After running the Goal Seek, Calc will calculate the number of units you need to
sell to reach your revenue target of $3,000.
○ The result will appear in Cell C2, which is the number of units you need to sell.
Expected Outcome:
You should see that to achieve a revenue of $3,000 with a price of $25 per unit, you would need
to sell 120 units.
QUESTION 2
You took out a loan and need to determine the monthly payment required to repay the loan in
a specific number of months, based on the loan amount, interest rate, and desired loan term.
Given:
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Loan Amount: $10,000
Annual Interest Rate: 5%
Loan Term: 3 years (36 months)
Goal: Calculate the monthly payment required to pay off the loan over the term at the
given interest rate.
Task:
Use Goal Seek to determine the monthly loan payment that would result in the loan being paid
off completely over 36 months, given the loan amount and interest rate.
Steps to solve this using Goal Seek:
1. Set up your data: Open a new sheet in OpenOffice Calc and enter the following data:
○ In Cell A1, enter "Loan Amount".
○ In Cell A2, enter 10000 (the loan amount).
○ In Cell B1, enter "Annual Interest Rate".
○ In Cell B2, enter 5% (the annual interest rate).
○ In Cell C1, enter "Loan Term (Months)".
○ In Cell C2, enter 36 (the number of months for the loan term).
○ In Cell D1, enter "Monthly Payment".
○ In Cell D2, leave this blank for now, as this is the value we want to calculate.
○ In Cell E1, enter "Total Payment".
○ In Cell E2, enter the formula =D2*C2 (to calculate the total amount paid over
the life of the loan, based on the monthly payment and loan term).
○ In Cell F1, enter "Interest Paid".
○ In Cell F2, enter the formula =E2-A2 (to calculate the total interest paid over
the loan term).
2. Use the PMT formula to calculate monthly payments: Normally, to calculate the
monthly payment for a loan, we can use the PMT function:
○ In Cell D2, enter the following formula:
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=PMT(B2/12, C2, -A2)
3. This formula calculates the monthly payment based on the annual interest rate (divided
by 12 to get the monthly rate), the loan term in months, and the loan amount (entered
as a negative value because it's an outgoing payment).
4. Set up the Goal Seek: Now, assume that you want to find out the monthly payment
required to reach a total payment of $12,000 (i.e., you want to target a specific total
payment). You can set the Total Payment to a fixed amount, and use Goal Seek to
adjust the monthly payment.
○ Select Tools → Goal Seek.
○ In the Goal Seek dialog:
■ Set "Set cell" to E2 (the Total Payment cell).
■ Set "To value" to 12000 (the target total payment).
■ Set "By changing cell" to D2 (the Monthly Payment cell).
○ Click OK.
5. Interpret the Result: After running Goal Seek, OpenOffice Calc will adjust the value in
Cell D2 (monthly payment) so that the total payment over the term will equal $12,000.
If you want to check if this monthly payment results in paying off the loan completely,
you can calculate the total payments and interest as follows:
○ In Cell E2, the Total Payment should show $12,000.
○ In Cell F2, the Interest Paid should show the amount of interest you are paying
over the life of the loan.
Expected Outcome:
After running Goal Seek, you should see the following:
● Monthly Payment (in Cell D2) will be approximately $333.33.
● Total Payment (in Cell E2) will be $12,000.
● Interest Paid (in Cell F2) will be $2,000 (the difference between the total paid and the
loan amount).
This means that, with a loan of $10,000 at an annual interest rate of 5% over 36 months, your
monthly payment would need to be about $333.33 to reach a total repayment of $12,000.