FUNDAMENTALS

OF MS EXCEL

L E C T U R E R : F A T I M A R U S T A M O VA
CONTENT
1. Introduction to Excel
2. Data validation
3. Pivot table
4. Macros
5. Time value of money on Excel
1. Moving from the Present to the Future
2. Financial functions covered in this chapter
1. The FV formula
2. The PV formula
3. The NPV formula
4. The PMT formula

6. Goal seek tool

INTRODUCTION

Excel is a spreadsheet program in the Microsoft Office system. You can use Excel to create and
format workbooks (a collection of spreadsheets) in order to analyze and display data.
Specifically, you can use Excel to track data, build models for analyzing data, write formulas to
perform calculations on that data, pivot the data in numerous ways, and present data in a variety
of professional looking charts.
A bar at the top. This is called the title bar and shows you what program you are in. You also see the words
Book1 in the title bar. This is the default title of your spreadsheet. Each spreadsheet is referred to as a Book
(short for workbook) by Excel.
The ribbon tabs. The different ribbons take the place of the toolbars and menus of previous versions of Excel.
The Ribbons offer access to all the different features.
The formula bar. This is the big white bar across the top of your spreadsheet. This is where text and data are
entered (and of course, formulas).
The work area. Excel always opens with cell A1 selected. A1 or any combination of letter and number is
called the cell address.
The work area is divided
into rows and columns.

The rows are designated

by a number (1, 2, 3,
etc.) while the columns
are designated by letters
(A, B, C, and so on).
The File Menu works the same as in any other program. This is where saving, opening, and printing is
handled. The file menu also contains hundreds of pre-made templates for budgets, invoices, calendars, and
more; select “new” from the file menu and browse through the templates. While we are here, let’s choose
Save As... and call our spreadsheet (Your Name) Excel.
The Home tab is where you will spend most of your time. Font settings, alignment, how numbers are
displayed, cell formatting, and editing are all found on the Home tab.
The insert tab is where you will go to add content such as charts, tables, and pictures to your Excel
spreadsheet. The Page Layout is where you set page margins, page orientation, and document scale.
The Formulas tab is where you will find a listing of all the most common formulas used in Excel. These
formulas, or functions, are broken down by category (financial, logical, date & time, etc.). This is a good
place to go if you can’t remember exact formulas when working on your spreadsheet.
The Data tab is most commonly used to import information from other Office programs, such as Word or
Access. Beginners typically don’t use this tab much, so we won’t discuss it in detail during this lesson.
The Review tab has a few useful features, most importantly being the spell check option.
The View tab gives you options on how you want your spreadsheet to be displayed.
DATA VALIDATION
Excel Data Validation is a feature
that restricts (validates) user input
to a worksheet. Technically, you
create a validation rule that controls
what kind of data can be entered
into a certain cell. For instance, you
can set up a rule that limits data
entry to 4-digit numbers between
1000 and 9999. If the user types
something different, Excel will
show an error alert explaining what
they have done wrong:
HOW TO DO DATA VALIDATION IN EXCEL

Step 1: Open the Data Validation dialog box.

Select one or more cells to validate, go to the Data tab > Data Tools group, and click the Data
Validation button. (shortcut: Alt > D > L, pressed separately)
HOW TO DO DATA VALIDATION IN EXCEL

Step 2: Create an Excel validation rule

On the Settings tab, define the validation
criteria according to your needs. In the
criteria, you can supply any of the following:
• Values - type numbers in the criteria boxes
like shown in the screenshot below.
• Cell references - make a rule based on a
value or formula in another cell.
• Formulas - allow to express more complex
conditions like in this example.
HOW TO DO DATA VALIDATION IN EXCEL

Step 3: Add an input message (optional)

If you want to display a message that
explains to the user what data is allowed in a
given cell, open the Input Message tab and
do the following:
• Make sure the Show input message when
cell is selected box is checked.
• Enter the title and text of your message
into the corresponding fields.
• Click OK to close the dialog window.
HOW TO DO DATA VALIDATION IN EXCEL

As soon as the user selects the validated cell,

the following message will show up:
HOW TO DO DATA VALIDATION IN EXCEL

Step 4: Display an error alert (optional)

In addition to the input message, you can show one of the following error alerts when invalid data
is entered in a cell.
HOW TO DO DATA VALIDATION IN EXCEL

Step 4: Display an error alert (optional)

In addition to the input message, you can show one of the following error alerts when invalid data
is entered in a cell.
HOW TO DO DATA VALIDATION IN EXCEL

Step 4: Display an error alert (optional)

In addition to the input message, you can show one of the following error alerts when invalid data
is entered in a cell.
PIVOT TABLE

A PivotTable is an extremely powerful tool that you can use to slice and dice data. You can track
and analyze hundreds of thousands of data points with a compact table that can be changed
dynamically to enable you to find the different perspectives of the data. It is a simple tool to use,
yet powerful.
The primary goal of using a PivotTable normally is to explore the data to extract significant and
required information. You have several options to do this that include Sorting, Filtering, Nesting,
Collapsing and Expanding, Grouping and Ungrouping, etc.
PIVOT TABLE

An Excel PivotTable is a tool to explore and summarize large amounts of data, analyze related
totals and present summary reports designed to:
• Present large amounts of data in a user-friendly way.
• Summarize data by categories and subcategories.
• Filter, group, sort and conditionally format different subsets of data so that you can focus on the most
relevant information.
• Rotate rows to columns or columns to rows (which is called "pivoting") to view different summaries
of the source data.
• Subtotal and aggregate numeric data in the spreadsheet.
• Expand or collapse the levels of data and drill down to see the details behind any total.
• Present concise and attractive online of your Excel data or printed reports.
PIVOT TABLE

How to make a pivot table in Excel: quick start

Many people think that creating an Excel pivot table is burdensome and time-consuming. But this
is not true! Microsoft has been refining the technology for many years, and in the modern
versions of Excel, the summary reports are user-friendly are incredibly fast. In fact, you can build
your own summary table in just a couple of minutes. And here's how:
PIVOT TABLE

Step 1. Organize your source data

Using an Excel Table for the source data gives you a very nice benefit - your data range becomes
"dynamic". In this context, a dynamic range means that your table will automatically expand and
shrink as you add or remove entries, so won't have to worry that your pivot table is missing the
latest data.
Useful tips:
– Add unique, meaningful headings to your columns, they will turn into the field names later.
– Make sure your source table contains no blank rows or columns, and no subtotals.
– To make it easier to maintain your table, you can name your source table by switching to
the Design tab and typing the name in the Table Name box the upper right corner of your worksheet.
PIVOT TABLE

Step 2. Create a pivot table

Select any cell in the source data table, and then go
to the Insert tab > Tables group > PivotTable.
This will open the Create PivotTable window.
Make sure the correct table or range of cells is
highlighted in the Table/Range field. Then choose
the target location for your Excel pivot table:
• Selecting New Worksheet will place a table in a
new worksheet starting at cell A1.
• Selecting Existing Worksheet will place your
table at the specified location in an existing
worksheet.
PIVOT TABLE
Clicking OK creates a blank pivot table in the target location, which will look similar to this:
PIVOT TABLE Field section

Step 3. Arranging the layout of your pivot table report

The area where you work with the fields of your summary report
is called PivotTable Field List. It is located in the right-hand
part of the worksheet and divided into the header and body
sections:
• The Field Section contains the names of the fields that you
can add to your table. The filed names correspond to the
column names of your source table.
Layout section
• The Layout Section contains the Report
Filter area, Column Labels, Row Labels area, and
the Values area. Here you can arrange and re-arrange the fields
of your table.
PIVOT TABLE
PIVOT TABLE - SUBCATEGORIES
PIVOT TABLE - SUBCATEGORIES
PIVOT TABLE - FILTER
PIVOT TABLE - FILTER
PIVOT TABLE

Step 4. Choose the function for the Values field (optional)

By default, Microsoft Excel uses the Sum function for numeric value fields that you place in
the Values area of the Field List. When you place non-numeric data (text, date, or Boolean) or
blank values in the Values area, the Count function is applied.
• But of course, you can choose a different summary function if you want to. In Excel 2016 an
2013, right-click the value field you want to change, click Summarize Values By, and choose
the summary function you want.
• In Excel 2010 and lower, the Summarize Values By option is also available on the ribbon - on
the Options tab, in the Calculations group.
 PIVOT TABLE

Step 4. Choose the function for the Values field (optional)

The functions' names are mostly self-explanatory:

Sum calculates the sum of the values.

Count counts the number of non-empty values (works as the COUNTA function).
Average calculates the average of the values.
Max finds the largest value.
Min finds the smallest value.
Product calculates the product of the values.
StDev An estimate of the standard deviation of a population, where the sample is a subset of the entire population.
StDevp The standard deviation of a population, where the population is all of the data to be summarized.
Var An estimate of the variance of a population, where the sample is a subset of the entire population.
Varp The variance of a population, where the population is all of the data to be summarized.
MACROS

Macros are a great way to automate repetitive tasks in Excel. If you find yourself doing the same
things over and over again, record your moves as a macro and assign a keyboard shortcut to it.
And now, you can have all the recorded actions performed automatically, with a single keystroke!
HOW TO RECORD A MACRO IN EXCEL

Like other VBA tools, Excel macros reside on the Developer tab, which is hidden by default. So,
the first thing you need to do is to add Developer tab to your Excel ribbon.
To record a macro in Excel, carry out these steps:
On the Developer tab, in the Code group, click the Record Macro button.
HOW TO RECORD A MACRO IN EXCEL
In the Record Macro dialog box that appears, configure the main parameters of your macro:
1. In the Macro name box, enter the name for your macro. Try to make it meaningful and
descriptive, so you’ll be able to easily find the macro in the list.
2. In the Shortcut key box, type any letter to assign a keyboard shortcut to the macro (optional).
3. From the Store macro in drop-down list, choose where you want to store your macro:
o Personal Macro Workbook – stores the macro to a special workbook called Personal.xlsb.
All the macros stored in this workbook are available whenever you use Excel.
o This Workbook (default) - the macro will be stored in the current workbook and will be
available when you reopen the workbook or share it with other users.
o New Workbook – creates a new workbook and records the macro to that workbook.
4. In the Description box, type a short description of what your macro does (optional).
5. Click OK to start recording the macro.
6. Perform the actions that you want to automate
7. When finished, click the Stop Recording button on the Developer tab.
HOW TO RECORD A MACRO IN EXCEL
HOW TO WORK WITH RECORDED
MACROS IN EXCEL
All main options Excel provides for macros can
be accessed via the Macro dialog box. To open it,
click the Macros button on the Developer tab or
press the Alt+ F8 shortcut.
In the dialog box that opens, you can view a list of macros available in all open workbooks or
associated with a particular workbook and make use of the following options:
– Run - executes the selected macro.
– Step into - allows you to debug and test the macro in the Visual Basic Editor.
– Edit - opens the selected macro in the VBA Editor, where you can view and edit the code.
– Delete - permanently deletes the selected macro.
– Options – allows changing the macro's properties such as the
associated Shortcut key and Description.
WHAT IS RECORDED WITH MACROS
Excel's Macro Recorder captures quite a lot of things - almost all mouse clicks and keypresses.
So, you should think over your steps carefully to avoid excess code that may result in unexpected
behavior of your macro. Below are a few examples of what Excel records:
– Selecting cells with the mouse or keyboard. Only the last selection before an action gets recorded.
For instance, if you select the range A1:A10, and then click cell A11, only the selection of A11 will
be recorded.
– Cell formatting such as fill and font color, alignment, borders, etc.
– Number formatting such as percentage, currency, etc.
– Editing formulas and values. Changes are recorded after you press ENTER.
– Scrolling, moving Excel windows, switching to other worksheets and workbooks.
– Adding, naming, moving and deleting worksheets.
– Creating, opening and saving workbooks.
– Running other macros.
WHAT CANNOT BE RECORDED WITH MACROS
Despite many different things that Excel can record, certain features are beyond the capabilities
of the Macro Recorder:
– Customizations of the Excel ribbon and Quick Access toolbar.
– Actions inside Excel dialogs such as Conditional Formatting or Find and Replace (only the result
gets recorded).
– Interactions with other programs. For example, you cannot record copy/pasting from an Excel
workbook into a Word document.
– Anything that involves the VBA Editor. This imposes the most significant limitations - many things
that can be done at the programming level cannot be recorded.
TIME VALUE OF MONEY
CONCEPTS USED

• One speaks of the rate at which money increases while it is invested or deposited in a bank as
the rate at which it appreciates in value, or THE RATE OF INTEREST it earns.
• Financial analysts speak of the time value of money as THE DISCOUNT RATE, and they use
it to discount future amounts of money back to their present equivalent values.
• When applied to capital budgeting, the term COST OF CAPITAL is used to describe the rate a
firm must pay to raise funds through borrowing and issuing stock—and which it must earn
back in order to break even on a capital investment.
MOVING FROM THE PRESENT TO THE FUTURE
In order to convert from present to future values (or the reverse), we must know what the time
value of money is. This is specified by the rate of appreciation or the interest rate, which is also
referred to as the discount rate. If a bank charges an annual interest rate of 10 percent on loans it
makes, any money borrowed from the bank is said to have a time value of 10%/year.
The effect of interest is a compound one. If we invest a principal sum at some rate of interest and
keep reinvesting the original sum plus any earned interest, the amount of interest earned each
year will increase with time. For example, if the original principal of $100 and the accumulated
interest continue to earn 10%/year, compounded annually, for n years, the total at the end of n
years will be

in general, the future value (F) of the present value (P) of a principal amount after a specified
number of periods (n) with compound interest at a specified rate of interest per period (i) is given
by the equation
FINANCIAL FUNCTIONS COVERED IN THIS CHAPTER

FV(rate, number of periods, payment, present value, type)

Computes the future value of a series of equal payments and/or a present value after a specified
number of periods at a specified rate of interest. Payments can be made at either the beginning or
end of each period, as specified by the value for type (0 for end, 1 for beginning).
FINANCIAL FUNCTIONS COVERED IN THIS CHAPTER

PV(rate, number of periods, payment, future value, type)

Computes the present value of a series of equal payments and/or a future value after a specified
number of periods at a specified rate of interest. Payments can be made at either the beginning or
end of each period, as specified by the value for type.
FINANCIAL FUNCTIONS COVERED IN THIS CHAPTER

NPV(rate, value1, value2,…)

Computes the present value of a series of future cash flows (value1, value2, …) at a specified rate
of interest. Cash flows are at the ends of successive periods, beginning with the first, and do not
have to be equal to each other.
FINANCIAL FUNCTIONS COVERED IN THIS CHAPTER

PMT(rate, number of periods, present value, future value, type)

Computes the value of a series of equal payments equivalent to a given present value or future
present value for a specified number of periods at a specified rate of interest. Payments can be
made at either the beginning or end of each period, as specified by the value for type. The PMT
function is useful for computing monthly mortgage payments to repay the present value of a loan
or the periodic investments in sinking funds to accumulate a given future value
THE FV FORMULA
• Among the most useful financial functions that Excel provides is the future value function, FV.
It can be used to find the future value of a single present value, a series of equal values made at
the end of each period (i.e., annuities), or a combination of the two. Its syntax is as follows:
THE FV FORMULA : EXAMPLE
A sum of $30,000 is invested at an annual rate of interest of 10 percent, compounded annually.
What is the value of the investment at the end of six years—that is, six years after making the
investment?
THE FV FORMULA : EXAMPLE
A sum of $30,000 is invested at an annual rate of interest of 10 percent, compounded annually.
What is the value of the investment at the end of six years—that is, six years after making the
investment?
F = $30,000(1 + 0.10)6 = $30,000(1.771561) = $53,146.83
CALCULATING THE FUTURE VALUE OF
A SERIES OF EQUAL FUTURE PAYMENTS
The formula for calculating the future value of a series of equal future payments:

Where:
F = future value
A = periodic payment
i = interest rate per interest period
n = number of interest-bearing periods
EXAMPLE: CALCULATING THE FUTURE VALUE OF A
SERIES OF EQUAL FUTURE PAYMENTS

• The CFO of the Baker Company invests $10,000 at the end of each month into a sinking fund
to accumulate capital for new equipment that will be purchased at the end of two years. The
money invested will earn interest at a 5 percent annual rate, compounded monthly. How much
will be available in the sinking fund at the end of two years?
EXAMPLE: CALCULATING THE FUTURE VALUE OF A
SERIES OF EQUAL FUTURE PAYMENTS
Note that in the key entry in Cell B7, the annual interest rate of 5 percent is converted to a
monthly rate by dividing the annual rate in Cell B2 by 12, and the total number of monthly
periods is calculated by multiplying the entry for the number of years in Cell B3 by 12. Also note
that the final value in the FV function is 0 (from Cell B6), which indicates that the CFO makes
the monthly investments at the end of each month rather than the beginning.
At the end of two years,
the sinking fund will
amount to $251,859.21,
of which $240,000 is the
sum of the 24 monthly
payments of $10,000
each, and $11,859.21 is
the total amount of
interest accumulated.
EXAMPLE: CALCULATING THE FUTURE VALUE OF
A SERIES OF EQUAL FUTURE PAYMENTS

Suppose the monthly payments of $10,000 (see preceding example) are made at the beginning of
each month instead of at the end. How would this affect the answer to Example 7.2?

The solution and the answer is left to students 

CALCULATING THE FUTURE VALUE OF A PRESENT
VALUE AND A SERIES OF PERIODIC VALUES

The following example illustrates the use of Excel’s FV function to calculate the future value of
an initial investment followed by a series of constant periodic investments.

Suppose that in addition to depositing $10,000 at the end of each month into a sinking fund (see
Example 7.2), the CFO of the Baker Company begins with an initial deposit of $200,000 at the
beginning of the first month. How would this affect the answer to Example 7.2?
CALCULATING THE FUTURE VALUE OF A PRESENT
VALUE AND A SERIES OF PERIODIC VALUES

The key entry in Cell B6 is =FV(B2/12,B3*12,B4,B5,B6). The future value of the sinking fund
is $472,847.47. Of this amount, $440,000 is the sum of the initial and periodic deposits, and
$32,847.47 is the total amount of interest earned during the two years.
Note that this example differs from the preceding example in having an initial investment in
addition to the series of equal future monthly payments. The future value of the $200,000 at the
end of two years is readily calculated as

Adding this amount to the future value of the series of $10,000 monthly payments gives
CALCULATING THE FUTURE VALUE OF A PRESENT
VALUE AND A SERIES OF PERIODIC VALUES
THE PV FORMULA

Excel’s PV function is used to calculate the present value of a single future amount, a series of
equal future amounts, or a combination of the two.

MOVING FROM THE FUTURE TO THE PRESENT

Equation below can be used to calculate the amount of money that must be invested at the present
time (P) in order to grow to a given future value (F) in a certain number of interest-bearing
periods (n) when invested at a specified rate of return per interest-bearing period (i).
THE PV FORMULA
Excel provides the PV function for finding the present value of a single future value, or a series
of equal values made at the end of each period (i.e., annuities), or a combination of the two. Its
syntax is:
THE PV FORMULA EXAMPLE

How large a lump sum of money would an individual need to invest at an annual rate of interest
of 10 percent, compounded annually, in order to have $30,000 at the end of six years?
• Substituting values into equation 7.2 gives
PRESENT VALUE OF A SERIES OF EQUAL PERIODIC PAYMENTS

The present value of a series of equal periodic payments made at the ends of the periods can be
computed by the formula:
PRESENT VALUE OF A SERIES OF EQUAL PERIODIC PAYMENTS

What is the present value of a series of monthly payments of $200 made at the end of each month
for the next five years? Assume that the discount rate is 5 percent per year, compounded monthly.
PRESENT VALUE OF A SERIES OF EQUAL PERIODIC PAYMENTS

What is the present value of a series of monthly payments of $200 made at the end of each month
for the next five years? Assume that the discount rate is 5 percent per year, compounded monthly.
USING PRESENT VALUES TO CHOOSE BEST ALTERNATIVE

The following example uses the PV function to compute the present values of the future cash
flows of three alternatives at a given discount rate in order to identify the most attractive
alternative.

Suppose you are given the following three cash inflows from which to choose.
Alternative A: Year-end receipts of $7,000 for each of the next four years
Alternative B: A single, lump-sum receipt of $31,000 at the end of four years
Alternative C: Year-end receipts of $2,600 for each of the next four years plus a lump-sum
receipt of $20,000 at the end of four years
Which alternative would you choose if the discount rate of money was 6 percent, and why?
USING PRESENT VALUES TO CHOOSE BEST ALTERNATIVE

The following example uses the PV function to compute the present values of the future cash
flows of three alternatives at a given discount rate in order to identify the most attractive
alternative.

Suppose you are given the following three cash inflows from which to choose.
Alternative A: Year-end receipts of $7,000 for each of the next four years
Alternative B: A single, lump-sum receipt of $31,000 at the end of four years
Alternative C: Year-end receipts of $2,600 for each of the next four years plus a lump-sum
receipt of $20,000 at the end of four years
Which alternative would you choose if the discount rate of money was 6 percent, and why?
USING PRESENT VALUES TO CHOOSE BEST ALTERNATIVE

Figure 7-11 shows the solution. The basis for choosing between the alternatives is the present
value of the future cash flows. To compute these, enter =-PV(B6,B7,B4,B5) in Cell B8 and copy
the entry to Cells C8:D8. To identify the alternative with the highest present value of the future
cash flows, enter =IF(B8=MAX(B8:D8),B3, IF(C8=MAX(B8,D8),C3,D3)) in Cell D9. The best
alternative to choose is Alternative C.
USING GOAL SEEK TO DETERMINE THE DISCOUNT
RATE FOR EQUAL PRESENT VALUES

The following example shows how to use Excel’s Goal Seek tool to determine the discount rate
that produces equal present values for two alternatives.
At what discount rate are the present values of the future cash flows of Alternatives A and C
equal? What is the present value of the future cash flows of Alternative B at the same discount
rate?
USING GOAL SEEK TO DETERMINE THE DISCOUNT
RATE FOR EQUAL PRESENT VALUES
Figure 7-12 shows the solution obtained with Excel’s Goal Seek tool. To use this tool, we need to
make two changes to the spreadsheet for the preceding example. We need to link the discount rates
for all three alternatives. To do this, enter =B6 in Cell C6 and copy the entry to Cell D6. In Cell D9,
calculate the difference between the present values of Alternatives A and C by the entry =B8-D8.
USING GOAL SEEK TO DETERMINE THE DISCOUNT
RATE FOR EQUAL PRESENT VALUES
Access the Goal Seek dialog box shown in Figure 7-13 on the Tools drop-down menu and make
the settings shown. The strategy is to use Goal Seek to find the value in Cell B6 that makes the
difference in Cell D9 between the present values of Alternatives A and C equal. Clicking OK or
pressing Enter causes the Goal Seek Status box shown in Figure 7-14 to appear. Clicking OK or
pressing Enter produces the results shown in Figure 7-12.
EFFECT OF DISCOUNT RATE ON PRESENT VALUE

Evaluate the effect of changes in the discount rate of money from 0 percent to 12 percent on the
present values of the three future cash inflows of Example 7.9. Use increments of 1 percent in the
discount rate, and indicate which alternative is the best choice at each discount rate.
Solution:
Figure 7-15 is the solution. To compute the present values, enter = –PV($B13,C$7,C$4,C$5) in
Cell C13 and copy the entry to C13:E25. To identify the best choice at each discount rate, enter
=IF(C13=MAX(C13:E13),C$3,IF(D13=MAX(C13:E13),D$3,E$3)) in Cell F13 and copy the
entry to F14:F25.
EFFECT OF DISCOUNT RATE ON PRESENT VALUE

Note that the best choice depends on the time value of money, as expressed by the discount rate. If
money has no time value, its value is the same regardless of when it is received. Therefore,
Alternative B is the best choice since it returns a total of $31,000, whereas Alternatives A and C
return smaller total amounts of $28,000 and $30,400.
As the time value of money increases, it is better to receive it sooner than later. Thus, as the results
in Figure 7-15 demonstrate, the best choice passes from Alternative B to Alternative C to
Alternative A as the discount rate increases from 0 to 12 percent. This is important to an investor
who borrows money to make an investment intended to provide a set of future cash flows. As the
discount rate (i.e., the interest rate the investor pays to borrow money) increases, it becomes
increasingly important to the investor to be repaid as soon as possible. This is because the present
value of income received further and further into the future becomes less and less as the rate of
interest increases.
 THANKS!
ANY QUESTIONS?