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Sensitivity Analysis using scenario manager - an introduction

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Let's say, I'm running a guest  house with 6 bedrooms. I've invested in the decor of the guest house by taking a loan from a bank. I've calculated the equal monthly instalments that I've to pay the bank and added them to my variable costs. Then I've calculated the cost of electricity, maintenance, salaries, advertisements, etc which contribute to my monthly or yearly variable costs. I also know what I can reasonably charge my customers. From these parameters I can easily calculate my expected revenues and profits before tax and after tax. Then I make some estimates about the growth of the rents and variable costs. From this data I can create different scenarios using the Solver function in Excel and perform a sensitivity analysis on my profits based on the rent, growth of rent per year, escalation of variable costs, etc.. Let's see how this is done using a training video. You may need to click on the 'play' button to start the video.
Earlier we had shown how to perform a sensitivity analysis using data tables.



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