F402/F560
Corporate Valuation and Strategy
Part 11b: Sensitivity Analysis with Excel Data Tables
One way to do a sensitivity analysis is to try many different values for a certain
variable. Record the effect of each different trial value on the outcome. Then you
can get a sense of how sensitive the outcome is to changes in that variable.
Fortunately, Excel can automate that process for you. All it takes is an Excel Data
Table. A Data Table makes the same calculation multiple times, using a different
value for one of the inputs each time. It makes these calculations all at once,
almost instantly, and it automatically records the result of each outcome in a
table for you.
For example, suppose you want to test the effect of different discount rates on an
NPV calculation. You could set up a spreadsheet as shown below. The formula for
the NPV uses a cell reference (this is critical) for the discount rate. So the formula
in cell D9 is =NPV(D7,D5:H5).
Let me repeat that: The formula for the outcome must include the cell where you
want to test different values. (Or it can contain a reference to the test-values cell.)
In the example below, the Data Table will be in the two columns C and D,
beginning in row 12. The Data Table will compute the NPV using values from 5% to
11% shown in column C.
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A
1
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B
C
Period
Cash flows
Discount rate =
Net present value =
D
E
F
G
H
1
2,000
2
3,000
3
4,000
4
3,000
5
2,000
9%
10,874
Data Table
10,874
5%
6%
7%
8%
9%
10%
11%
Create the Data Table by doing the following two steps.
1. Place a formula (or a cell reference to a formula) at the top of the right
column in the range that will be the Data Table (D12 in the example above).
2. Place the trial values to be substituted in the left column, starting one row
down.
Next, highlight the entire Data Table range and click on the menu item to bring up
the Data Table dialog box. The way to bring up the dialog box varies according to
the version of Excel you are using.
 Windows Excel 2007
 Windows Excel 2010
 Mac Excel 2011
Activate the Data ribbon, and click on What-If Analysis | Data Table.
 Mac Excel 2008
 Windows Excel 2003
Using the menu bar at the top, click on Data | Table.
This brings up the amazingly unhelpful dialog box shown below.
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In this dialog box, you tell Excel where your trial values – the figures you entered
into the left column of the Data Table -- are to be substituted.
In this case, we want them to be substituted into cell D7 for the discount rate. And
the trial values in the table are in a column (they’re all in column C), so put the D7
cell reference in the “Column input cell” box in the dialog box.
Then when you click OK, the Data Table is created, as shown below. Make sure you
press F9 if necessary to have Excel calculate all the cells (the recalc key
combination on a Mac is Cmd =).
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A
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B
C
Period
Cash flows
D
E
F
G
H
1
2,000
2
3,000
3
4,000
4
3,000
5
2,000
Discount rate =
Net present value =
9%
10,874
Data Table
5%
6%
7%
8%
9%
10%
11%
10,874
12,116
11,786
11,469
11,165
10,874
10,594
10,325
That’s how you create a Data Table. We now see what the NPV would be at each
of those different discount rates.
There’s another example on the next page. It shows a Data Table to test the
sensitivity of an equity valuation to changes in the estimate of beta. The steps in
performing this sensitivity analysis with a Data Table were:
1. Construct the spreadsheet model. Make sure the formula in the outcome cell
(Value per share in C37) refers in some way to the cell whose values you want
to test (C19).
2. List the trial values you want to test in a column on the same worksheet. In this
case, they are in cells C41 to C49.
3. Place a reference to the outcome cell at the top of the column next to the list
of test values. In this case, that’s cell D40.
4. Highlight the Data Table range (C40:D49). Go to the menu item for Data |
Table. Since your test values are in a column, you will enter a cell reference in
the “Column Input Cell” box.
5. In the “Column Input Cell” box, enter a reference to the cell where you want to
substitute the trial values. In this case, that’s the beta cell, C19.
6. When you click OK, Excel runs all the calculations and fills in the Data Table as
shown. You may have to press F9 to force a recalculation (Cmd = on a Mac).
7. Add a chart showing the results.
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B
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C
D
Time Zero
FCF
Value of ending capital
g (=growth rate in operating capital)
ROIC
Tax rate
F
Year 2
(95,000)
18.0%
13.0%
G
Year 3
85,000
10.0%
Year 4
(150,000)
4,000,000
6.5%
13%
38%
WACC
Value of debt
Value of equity
Total
200,000
25,000,000
25,200,000
Weight of debt
Weight of equity
0.008
0.992
Cost of debt
7.0%
beta
Risk-free rate
Market risk premium
Cost of equity
0.6
5.0%
6.0%
8.60%
WACC
8.57%
Present value of four-year forecast
Horizon value
Present value of horizon value
Total present value
Mid-year discounting factor
Present value of operations
Cash and marketable securities
Total value of corporation
Value of debt and other obligations
Value of equity
Shares outstanding
Value per share
(329,394)
12,583,545
9,057,839
8,728,445
1.042
9,094,612
180,000
9,274,612
(480,000)
8,794,612
780,000
$11.28
Sensitivity to beta
Excel Data Table
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E
Year 1
(225,000)
$11.28
$16.50
$11.28
$8.39
$6.57
$5.31
$4.40
$3.70
$3.15
$2.71
0.5
0.6
0.7
0.8
0.9
1.0
1.1
1.2
1.3
$20
$15
$10
$5
$0
0.5
0.6
0.7
0.8
0.9
1.0
1.1
1.2
1.3
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