Economics
Spreadsheet Modeling in Corporate Finance - Craig W. Holden, 161 Pages
This book uses a number of conventions.
Time Goes Across The Columns And Variables Go Down The Rows. When something happens over time, I let each column represent a period of time. For example in capital budgeting, year 0 is in column B, year 1 is in column C, year 2 is in column D, etc. Each row represents a different variable, which is usually a labeled in column A. This manner of organizing spreadsheets is so common because it is how financial statements are organized.
Color Coding. A standard color scheme is used to clarify the structure of the spreadsheet models. The printed book uses: (1) light gray shading for input values, (2) no shading (i.e. white) for throughput formulas, and (3) dark gray shading for final results ("the bottom line"). The accompanying electronic version of the book (a PDF file) uses: (1) yellow shading for input values, (2) no shading (i.e. white) for throughput formulas, and (3 green shading for final results ("the bottom line"). A few spreadsheets include choice variables. Choice variables use medium gray shading in the printed book and blue shading in the electronic version.
The Time Line Technique. The most natural technique for discounting cash flows in a spreadsheet model is the time line technique, where each column corresponds to a period of time. The time line technique handles the general case of the discount rate changing over time just as easily as the special case of a constant discount rate. Typically one does have some information about the time pattern of the riskfree rate from the term structure of interest rates. Even just adding a constant risk premium, yields a time pattern of discount rates. There is no reason to throw this information away, when it is just as easy to incorporate it into a spreadsheet. I use the time line technique and the general case of changing discount rates throughout the capital budgeting spreadsheet models.
Explicit Inflation Rate. A standard error in capital budgeting is to treat the cash flow projections and discount rate determination as if they came from separate planets with no relationship to each other. If the implicit inflation rate in the cash flow projection differs from the implicit inflation rate in the discount rate, then the analysis is inconsistent. The simple fix is to explicitly forecast the inflation rate and use this forecast in both the cash flow projection and the discount rate determination. The capital budgeting spreadsheet models teach this good modeling practice.
Dynamic Charts. Dynamic charts allow you to see such things as a "movie" of the Term Structure of Interest Rates moves over time or an "animated graph" of how increasing the volatility of an underlying stock increases the value of an option. Dynamic charts are a combination of an up/down arrow (a "spinner") to rapidly change an input and a chart to rapidly display the changing output. I invented dynamic charts back in 1995 and I have included many examples of this useful educational tool throughout this book.
Product Details
Paperback: 161 pages
Publisher: Prentice Hall (May 15, 2002)
Language: English
ISBN-10: 0130499056
ISBN-13: 978-0130499059
Product Dimensions: 11 x 8.3 x 0.5 inches
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Nguồn
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: Internet |
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Tác giả
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: Craig W. Holden |
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Kiểu tập tin
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: PDF |
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Độ lớn tập tin
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: 1.48MB |
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Đăng bởi
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: Thanh Ngoc |
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Cập nhật
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: 30.11.2011 |
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Số lượt xem
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: 299 |
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Số lượt tải
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: 14 |
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