Scenario Analysis can be easily performed through a two-step process: set up the model and run the model. In the Scenario Input Settings subtab (Figure 4.2 shows the DCF module’s default example’s Scenario Input Settings), start by selecting the output variable you wish to test from the drop-down list. Then, based on your selection, the precedents of the output will be listed under two categories (Line Item, which will change all input assumptions in the entire line item in the model simultaneously, and Single Item, which will change individual input assumption items). Select one or two checkboxes at a time and the inputs you wish to run scenarios on and enter the plus/minus percentage to test and the number of steps between these two values to test. You can also add color coding of sweet spots or hotspots in the scenario analysis (values falling within different ranges have unique colors). You can create multiple scenarios and Save As each one (enter a Name for each saved scenario).
Proceed to the Scenario Output Tables (Figure 4.3) to run the saved analysis. Click on the drop-down list to select the previously saved scenarios to run. The selected scenario table complete with sweet spot/hotspot color coding will be generated. Decimals can be increased or decreased as required, and you can Copy Grid or View Full Grid as needed. To facilitate review of the scenario tables, pay attention to the NOTE, which provides the information of which input variable is set as the rows versus columns.
Here are some additional tips:
Figure 4.1 – Static Tornado Analysis
Figure 4.2 – Scenario Analysis: Scenario Input Settings
Figure 4.3 – Scenario Analysis: Scenario Output Tables