Bus100 Sem2

Bus100 Slides
BUS100 Business Skills

and Management
Seminar Two
SIM University
Jan 2016
Copyright © 2015-16 SIM University. All rights reserved

1
EXCEL PROBLEM ANALYSIS

AND MODELING

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Bus100 Slides
Overview
• Store and Lookup Data
• Calculate interests, loans, repayments.
• Evaluate time value of money
• Create user-defined functions
• Automate the use of Excel

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Problem 1 (Revision)
Cap Master is a small and medium enterprise
that specializes in the sale of proprietary
insulation solutions for smaller companies in
the oil and gas industry. They have a sales
team of 7 sales consultants. The raw monthly
sales for year 2014 have been tabulated. The
Sales Director wants to use Excel to generate
useful data from the raw sales data.

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Bus100 Slides
Problem 1 (Revision)
1. Using functions “match()” and “index()” to
write a formula that returns the sales by a
sale consultant for a specific month.
2. Using “vlookup()” to write a formula that
return the yearly sale by a particular
consultant.

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Problem 1 (Solution)
Annual Sales

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Bus100 Slides
Row # of Sale
Sale Sale Column # Consultan
Consultant Month Consultant of month t's sales
Sally January 4 1 $6,545
Annual Sales
Tim $59,907

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Money makes Money!

Discuss: What is the business of a bank?
Or, what does a bank do anyway?

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Bus100 Slides
Problem 2A (Using “PMT”)

I want to borrow $200,000 to invest in a
bakery business. The bank is willing to lend
me the money for a period of five years at 5%
per annum (monthly rest). The payment
schedule is a fixed amount every month for
60 months and a "balloon" payment of
$10,000 with the last payment. How much do
I have to pay the bank each month?

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Problem 2A (Solutions)
Rate Nper pv fv pmt

5.0% 60 $200,000 -$10,000 -$3,627
per yr mth

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Bus100 Slides
Problem 2B (“PV”)
I want to spend nine months away on an
overseas exchange program or work
assignment. I would need $3,500 each month
for expenses and in the last month, an
additional $600 for buying gifts. At 3% per
year interest, how much money (after paying
for airfare, etc.) should I have initially in my
bank account to cover the cost of this
adventure?
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Problem 2B (Solutions)
Rate Nper pv fv pmt

3.0% 9 $31,774 -$600 -$3,500
per yr mth

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Bus100 Slides
Problem 2C (“FV”)
I am investing $100,000 right now on new
machinery and will add $8,000 each year to
upgrade it for the next 10 years. The
expected return of this investment is 6.5%
per year. At the end of 10 years, how much
is this machine worth assuming it remains
as good as new?

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Problem 2C (Solution)
Rate Nper pv fv pmt
6.5% 10 -$100,000 $295,669 -$8,000

per yr yr

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Bus100 Slides
Problem 2D (“Rate”)
I am investing $100,000 right now in a new
endowment policy (an insurance product) and
will add $10,000 each year for the next 10
years. If I want the money to grow to
$250,000, what kind of expected return rate
must I get for my money?

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Problem 2D (Solutions)
Rate Nper pv fv pmt

3.1% 10 -$100,000 $250,000 -$10,000
per yr yr

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Bus100 Slides
Problem 2E (“Nper”)
I am investing $50,000 right now and will add
$8,000 each year. If the return rate is 8% per
year, how many years must I invest before
the investment grows to $250,000?

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Problem 2E (Solution)
Rate Nper pv fv pmt

8.0% 11 -$50,000 $250,000 -$8,000
per yr yr

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Bus100 Slides
Time Value of Money

Discuss: Is $1000 today the same as $1000
in 12 months’ time?
Why???

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Problem 3A (“NPV”)
I am investing in a car wash business project
with an initial capital $200,000 and a
sequence of cash flows thus generated as
shown below. If the return rate is 8% per
year, what is the project worth at today's
value?

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Bus100 Slides
Problem 3A (Solution)
B C
Year CashFlow
16 0 -$200,000
17 1 $56,990 Return Rate NPV
2 $54,637 G12
F12 8.0% $136,656
3 $56,529
4 $58,957
5 $48,988
6 $58,416
7 $40,820
=NPV(F12,C17:C25) + C16
8 $56,935
25 9 $48,186

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Problem 3B (“IRR”)
I am investing in a project with an initial
$200,000 and a sequence of cash flows thus
generated as shown below. What would the
return rate need to be for the sum of the
return cashflows to be equivalent to the initial
investment?

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Bus100 Slides
Problem 3B (Solution)
IRR
24.0%
per yr
E
Year CashFlow
16 0 -$200,000
17 1 $56,990
2 $54,637
3 $56,529
4 $58,957
5 $48,988
6 $58,416
7 $40,820
8 $56,935
9 $48,186
26 10 $44,898
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Problem 4 (“Goal Seek”)

Tim wants to pay off his mortgage for his
house in 15 years. The annual interest rate is
6%. The bank told him he can afford monthly
payments of $2,000. How much can Tim
borrow?

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Bus100 Slides
Dur (mths) 180

Annual
interest Rate 6%
Amount
Borrowed -237007
Monthly
Payment $2,000
Is this a computational or exploratory model?

25
Prob 5 (User-Defined Functions)

Volume of box is Length x Breadth x Depth.
Instead of using formula, can you find a

function that can calculate this?

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Bus100 Slides
• Users may create their own functions!
• Must save file as .xlsm
• Developer > Visual Basic > Insert Module
• Enter into Module 1:
Public Function BoxVolume(A As Variant, B As Variant, C As Variant) As

Variant
Dim Result As Variant
Result = A * B * C
BoxVolume = Result
End Function

27

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Bus100 Slides

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Prob 6 (Beyond UDF: Macros!)

• A UDF can change only 1 cell at a time.
• But suppose you needed to update many cells at one
go.
• Example: you input “I am good” and you want each
cell to hold only one letter of your input phrase.
• Can you use copy-and-paste?
• Can you use a function or UDF?

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15
Bus100 Slides
Prob 6 (What is a Macro?)

Excel is programmable!
A Macro is a subroutine that acts like a robot telling Excel
what to do. It can update one or more cells, like as though
you were doing it!
We can create a macro to input “I am good” (or any

message) and then get it to split the letters and type each
letter into a cell. And even centralize the letter in the cell.
Let’s automate this!

31
Prob 6 (Show Developer Tab)

• Excel 2007:
Ms Office Button > Excel Options > Popular >
check Show Developer tab > Ok
• Excel 2010
File > Excel Options > Customize Ribbon > check
Developer in the Main Tabs window on the right.

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Bus100 Slides
• Users may create smart macros.
• File must be in .xlsm format.
• To input macro code, click:
Developer > Macros > Macro name: ExpandText > Create
• Enter macro code into VBA Editor and Save.
• See next slide for the macro code for “ExpandText”.
• Macro codes use VBA programming language.
• Normally crafted by experts. (beyond scope of Bus100)

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Macro Code Example

Sub ExpandText()
Worksheets("prob6").Activate
txt = InputBox("Please type a short message", "Input", "I like UniSIM")
txtDirection = 0
p = InStr(txt, ",")
If p > 0 Then
txtDirection = Mid(myText, p + 1)
txt = Mid(txt, 1, p - 1)
End If
For i = 1 To Len(txt)
oneLetter = Mid(txt, i, 1)
If txtDirection = 0 Then
ActiveCell.Offset(0, i - 1).Value = oneLetter
ActiveCell.Offset(0, i - 1).HorizontalAlignment = xlCenter
Else
ActiveCell.Offset(i - 1, 0).Value = oneLetter
ActiveCell.Offset(i - 1, 0).HorizontalAlignment = xlCenter
End If
Next i
MsgBox "ExpandText Macro is done!"
End Sub

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Bus100 Slides

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• Assign shortcut key to the Convert macro:
• Developer > Macros > Select “ExpandText” > Options…
• Type Shift-E for shortcut box.
• Type Description: Expand text into characters
• Click OK and then Cancel
• Move your cursor to any cell beyond column C.
• Type Shift-Ctl-E to run your macro!
• You can also click on Developer > Macros > d-click
ExpandText (macro name)

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Bus100 Slides
BUSINESS CASE STUDY

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Case Study
Looks Familiar?
Major Manufacturer

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Bus100 Slides
Seagate
• Seagate is a leader in storage devices and solutions
• They manufacture and distribute Hard Disk Drives
(HDD) for consumers, companies and distributors
• HDD are used in storage devices, laptops, MP3
players and etc.
• Annual turnover in 2014 was USD13B with income of
USD1.5B
• Manufacturing Plants and Offices in Philippines,
Singapore, Malaysia, Indonesia, Taiwan and China.

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Nature of Business
• Seagate sells their HDD to laptop
manufacturers and electronic distributors
• They outsource the distribution of their HDD
to a global third party logistic company that
have presence in key cities in Asia Pacific

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Bus100 Slides
Case Scenario (1 of 2)
• The marketing department had just completed
their sales projection for the new calendar year.
However management are concerned with the
increasing competitive landscape. The CEO, Mr
Han, had directed the marketing department to
come up with a tiered pricing strategy for their
customers and in-order to retain these customers
and to deter them from moving to another
competitor

41
Case Scenario (2 of 2)
• Marketing had tiered their customers into key and
valued customers. Key customers have orders of
more than 50,000 HDDs. Retaining the key
customers are important. They wanted to give at
least 10% discount over the current list price to
the key customers and to make sure they stay
with them.

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Bus100 Slides
Case Details
• Seagate have three HDD products and namely
Barracuda, Angel and Shark. Barracuda is a
higher specification HDD and commend a higher
price.
• Key customers are given 10% discount over
current list price
• Valued customers are given discount of 6%. Use
functions like Lookup and Solver to determine a
tiered pricing discount strategy to retain their
customers for the coming year.
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Business Concepts
• Marketing concepts
– Marketing environment
– Segmenting the markets
– Channel distributions
– Pricing concepts
• Management
– Decision making

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Bus100 Slides
MathFunction
• Match()
• Index()
• Lookup()
• Solver feature

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Constraints in setting up Solver

• “New Price” List is less than the “Current
Price” list
• Key customers have at least 10% discount
• Valued customers have at least 6%
discount
• Price must not increase with quantity
• Even with discounts, seek to maximize the
revenues for the various product mixes
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Bus100 Slides
Modeling with Excel
• Applying the solver

with the various
constraints

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Findings and Recommendations
Revised Price Lists Overall drop in

revenue using
the revised
price list
Reduction in
revenue for
both key
and valued
customers
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Bus100 Slides
Hands-On Modeling
Let’s get to work on the Model now!

49
Pros and Cons

• With 3 products and 6 different quantity ranges,
one has to change 18 prices to achieved the
desired price range in-order to minimize the price
decrease and maximize the revenue.
• Testing out the different variations of price ranges
manually will be too difficult and tedious.
• Solver provides a useful tools to quickly generate
the revised lists
• However one have to be mindful in applying the
appropriate constraints for the solver.
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Bus100 Slides
Management and Business Issues

• Eroding margins: still viable to produce?
• Substitute Products: SSD superior
• Can the Seagate make up loss elsewhere?
• Can “Loss” be regarded as “Investment”?
• Should Seagate re-engineer or exit?

51
Governance and Ethics

• Very competitive for Seagate: market share is
shrinking!
• To survive, will the Sales/Marketing
department act in unethical ways?
• How?
• What would regulate or control this?

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Bus100 Slides
Lessons Learnt
• To win, we may have to lose first.
• Businesses must adjust to macro changes or risk
obsolescence.
• Business Leaders have to make unstructured
decision calls.
• Important to resist temptations in Sales and
Procurement work
• Ethical Values are important: especially for Singapore
Government and Western companies.

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Bus100 Slides

BUS100 Business Skills

Copyright © 2015-16 SIM University. All rights reserved

EXCEL PROBLEM ANALYSIS

Copyright © 2015-16 SIM University. All rights reserved

Copyright © 2015-16 SIM University. All rights reserved

Copyright © 2015-16 SIM University. All rights reserved

Copyright © 2015-16 SIM University. All rights reserved

Copyright © 2015-16 SIM University. All rights reserved

Copyright © 2015-16 SIM University. All rights reserved

Money makes Money!

Or, what does a bank do anyway?

Copyright © 2015-16 SIM University. All rights reserved

Problem 2A (Using “PMT”)

Copyright © 2015-16 SIM University. All rights reserved

Rate Nper pv fv pmt

Copyright © 2015-16 SIM University. All rights reserved

Rate Nper pv fv pmt

Copyright © 2015-16 SIM University. All rights reserved

Copyright © 2015-16 SIM University. All rights reserved

Rate Nper pv fv pmt

6.5% 10 -$100,000 $295,669 -$8,000

Copyright © 2015-16 SIM University. All rights reserved

Copyright © 2015-16 SIM University. All rights reserved

Rate Nper pv fv pmt

Copyright © 2015-16 SIM University. All rights reserved

Copyright © 2015-16 SIM University. All rights reserved

Rate Nper pv fv pmt

Copyright © 2015-16 SIM University. All rights reserved

Time Value of Money

Copyright © 2015-16 SIM University. All rights reserved

Copyright © 2015-16 SIM University. All rights reserved

Copyright © 2015-16 SIM University. All rights reserved

Copyright © 2015-16 SIM University. All rights reserved

Problem 4 (“Goal Seek”)

Copyright © 2015-16 SIM University. All rights reserved

Dur (mths) 180

Is this a computational or exploratory model?

Prob 5 (User-Defined Functions)

Instead of using formula, can you find a

Copyright © 2015-16 SIM University. All rights reserved

Public Function BoxVolume(A As Variant, B As Variant, C As Variant) As

Copyright © 2015-16 SIM University. All rights reserved

Copyright © 2015-16 SIM University. All rights reserved

Copyright © 2015-16 SIM University. All rights reserved

Prob 6 (Beyond UDF: Macros!)

Copyright © 2015-16 SIM University. All rights reserved

Prob 6 (What is a Macro?)

We can create a macro to input “I am good” (or any

Let’s automate this!

Copyright © 2015-16 SIM University. All rights reserved

Prob 6 (Show Developer Tab)

Copyright © 2015-16 SIM University. All rights reserved

Copyright © 2015-16 SIM University. All rights reserved

Macro Code Example

Copyright © 2015-16 SIM University. All rights reserved

Copyright © 2015-16 SIM University. All rights reserved

Copyright © 2015-16 SIM University. All rights reserved

BUSINESS CASE STUDY

Copyright © 2015-16 SIM University. All rights reserved

Copyright © 2015-16 SIM University. All rights reserved

Copyright © 2015-16 SIM University. All rights reserved

Copyright © 2015-16 SIM University. All rights reserved