This is a guest post written by Paramdeep from Pristine. Chandoo.org is partnering with Pristine to bring an excel financial modeling online training program for you.
This is Part 6 of 6 on Financial Modeling using Excel
In this tutorial we are going to learn how to build assumptions & input sheets in our excel financial model. The 6 parts of this tutorial are,
- Introduction to Financial Modeling
- Building a layout for Project Evaluation Model – Best practices
- Building Inputs and Assumptions Sheet
- Building Projections for Project Evaluation
- Modeling the Cash Flow Statement and Projections
- Putting it all together – Final Project Evaluation Model
- Join our Financial Modeling Classes
I am sorry for the slight delay in the post. Things have been very hectic for the last few weeks as we were just completing our training on Financial Modeling in Excel – Real Estate (RE) sector for JP Morgan. The real estate valuation is very similar to the project evaluation that we are doing for the simple reason:
- Project evaluation and real estate valuation are limited duration projects (If you intend to sell the RE project in near future) unlike general companies (which are an on-going concern)
- For both these the timing of the cash is very important. A delay in the timing might appear to be ok for the developer, but the investor’s calculations (typically IRR) go for a toss
In India most of the RE developers are businessmen, who are concerned about the cash that the project generates. They are not really too bothered if they receive it in April or September (After all they are getting the cash). But the investors are really bothered by these delays – Some PE investors have a limited period investment horizon and some are too concerned about the IRR generated by the project. As we figured out in our class, Real estate projects are very sensitive to delays in cash generation! Excel is a great tool to show this effect in a matter of 30 secs (Use XIRR and data-tables). Maybe I will write about this functionality in one of my posts later!
For the time being lets come back to our project.
What is time value of money?
Let me start with a very simple to understand example.
- If you invest $100 in bank today, what would be its value 1 year down the line (assuming 10% interest rate)?
- The value should be 100*(1+10%) = $ 110.
- Now if you keep this invested for another year, what would be its value 2 years down the line?
- The value should be 110*(1+10%) = $ 121. I can also write it as 110*(1+10%)^2
- Similarly if you keep invested for 10 years, the value would be 110 * (1+10%)^10
This is the simple concept of compounding.
The inverse of this concept (What if you wanted $110 after 1 year, or 110*(1+10%)^10 after 10 years), how much should you invest today, is called discounting. Clearly $100 today is worth $110 a year after and $121 two years hence.
If I have more than 1 cash flows, I can discount them depending on the time duration and if I sum them all, its called Net Present Value (NPV) of all cash flows. We would take the outflows as Negative Cash and inflows as Positive Cash.
In excel, you can either discount all cash flows or calculate the NPV of the project by using the function =NPV(Discount Rate, Cash)
What is the rate on which money should be discounted?
When equity investors invest, they take greater risk as compared to banks lending money. Obviously their expectation of return would be higher. In some cases, the equity investor might have a return figure in mind (Based on the risk I am taking, I would like to have Min. 15% return on my invested money).
Sometimes, this expected return can be calculated by using the capital asset pricing model (CAPM). What this states is very simple – Equity investors want a premium apart from the risk free rate (Lets call this expectation of equity investors as Re) . So there are two parts to the return expectation:
Re = Risk Free + Premium apart from Risk free
Now this premium depends on how much risk I am taking (Typically measured with respect to the volatility in returns with respect to the benchmark index). So I say:
Re = Risk Free + Beta * (Market Returns – Risk Free Returns)
The beta measures the movement of your returns with respect to market returns.
Now apart from the equity investors, there would be some debt in the project. Typically debt holders expect a lower return (Lets call it Rd).
The overall expectation of return from the project is the weighted average of these returns, Re and Rd.
To create this switch in the model, I have used data-validation (so that the user can just input one of these options)
To create such a drop down, use data validation – list option in excel
Internal Rate of Return
The same concept can be viewed from a return angle as well. If I can calculate a discount rate that makes the present value of the expected cash inflows just equal to the initial cost of the project, then that rate would be sort of a break even rate for me (Considering the time value of money). This rate is called the Internal rate of return (IRR).
Many investors have a certain hurdle IRR in mind and if the project is generating an IRR less than the hurdle IRR, they would not invest in the project.
To calculate IRR, there is no analytical solution possible. You can use the excel function =IRR(Cash) to get the IRR of the cash flows.
Making a decision in our case
First let me summarize the decision criteria for you. I would invest in the project based on the following conditions:
NPV Rule:
- If NPV > 0: The project may be accepted (Please note that positive NPV is not a sufficient condition)
- If NPV = 0: The investor should be indifferent
- If NPV < 0: The project must not be accepted (Please note that positive NPV is a necessary condition)
Please note that sometimes people might decide to take on the project even though the NPV is negative!
IRR Decision Rule
- If IRR > the required rate of return, accept the project
- If IRR < the required rate of return, reject the project
In our case, we are getting the NPV to be 21 and an IRR to be 12%. In this case it’s a borderline case and my feeling is that Mr. Samar would invest in the project (After all Mohit is his son!!) J.
Download Project Valuation Templates
I have created a template for you, where the subheadings are given and you have to link the model to get the cash numbers! You can download the same from here:
Project Valuation Template – Blank
You can go through the case and fill in the yellow boxes. I also recommend that you try to create this structure on your own (so that you get a hang of what information is to be recorded).
Also you can download this filled template and check, if the information you recorded, matches mine or not! 😉
Project Valuation Template – Solution
I am just doing that for the single sheet model and recommend that you do the same for multi-sheet model as a homework problem. If you face any issue, post your excel with the exact problem and we can discuss the way to move forward.
Next Steps
We are not done with a basic model for evaluation of a project. There are other nuances that we could not tackle (Given the time and space constraint) – What if the cash does not come at year end, what could be the scenarios in which this project is not a viable project, what can be done to make the project more interesting, etc. I do hope that you found the posts interesting and look forward to your comments and suggestions!
Read previous part of this series – Modeling Cash-flow projections
How do you make project investment decisions?
We are very eager to learn from your experience and know your ideas. What methods of valuation do you use? How do you model them? Share using comments.
Join our Financial Modeling Classes:
Chandoo.org is partnering with Pristine to bring an online financial modeling training program for you. Click here to learn more about our financial modeling class & join.
Added by Chandoo:
Thank you Paramdeep & Pristine:
Many thanks to Paramdeep and Pristine for making this happen. I am really enjoying this series and learning a lot of valuable tricks about financial modeling.
If you like this series, say thanks to Paramdeep. I am sure he can take any amount of appreciation without choking.
Pristine is an awesome training institute for CFA, PRIMA, GARP etc. They have trained folks at HSBC, BoA etc. Chandoo.org is partnering with Pristine to bring an excel financial modeling online training program for you.
41 Responses to “Calculate Elapsed Time in Excel [Quick Tips]”
Hi Chandoo,
To calculate time lapses in excel I usually use the DATEDIF function. Even though is undocumented by MS there is a great explanation of its use in Chip Pearson's site :
http://www.cpearson.com/excel/datedif.aspx
Is pretty easy to use and has great flexibility.
See you and keep Excelling!!!
Another great article, I will be linking to it on my blog.
Oliver:
Yes, I think that DATEDIFF do it better.
Great post! This a fantastic tutorial on calculating elapsed time in Excel that could be helpful even to a novice user. Keep up the useful tips!
Also, the Office community on Facebook could really benefit from you knowledge! Check it out at http://www.facebook.com/office
Cheers,
Andy
MSFT Office Outreach Team
hi, Chandoo !!!
for elapsed time , we can use this unique formula either for hours, minutes or seconds : NOW()-A1)
but using respective special number formats
for hours : [h] ==> 46553
for minutes : [m] ==>2793212
for seconds : [s] ==> 167592763
We can also use mean duration for years (orbital period of the Earth around the Sun : i-e tropical year) which is : 365.25 days
and mean duration for month : 365.25/12 days
be Excelent !!!!
@Oliver... Thanks for the pointer to datediff(). I will update the post with information about this as well.
@Glen... thanks for the linklove 🙂
@Andy... Welcome. Thanks for telling us about the office community on FB.
@Modeste ... that is very cool. I will remember these formatting codes for an upcoming article on number formatting codes 🙂
Great tip Chandoo! I use the formula to calculate years elapsed all the time. It can seriously help save a ton of time with calculations. Also, NETWORKDAYS is one that helps and can seriously impress a boss. Keep up the great work here!
No problem! I will definitely be directing people with tough Excel questions to your blog. Keep up the great posts!
Andy
MSFT Office Outreach Team
Hi,
always great posts and a good way to start my day
but regarding the elapsed time calculations: have you never noticed that there is a result difference between using =TODAY()-A1 and using =NETWORKDAYS(A1,TODAY())?
try it for A1= a Monday such as 21sep09 and "today" is e.g. a Thursday; you get 3 or 4 respectively as a result, depending on the formula used; this is because formula =networkdays() always includes both the startdate and the end date and not only the time between these 2.
This is easily corrected/compensated bij always adding a -1 to the =networkdays() formula because the majority of us will count startday as day 0 and then the result will be consistent across the different formulas.
However, you then get into trouble if you calculate the networkdays for a date further in the past and where either the start or end date falls in a weekend.
just thought to point this out as to me these formula's are not interchangeable just like that!
have a great day!
Paul
=DATEDIF([DOJ],TODAY(),"Y") & " Y, " & DATEDIF([DOJ],TODAY(),"YM") & " M, " & DATEDIF([DOJ],TODAY(),"MD") & " D"
This will fix your 30 Days problem
I calculated the time diff between two date+ times by subtracting 2 cells & custom formatted it to "d hh:mm" format.
E.g.
Cell A1 04-Jan-12 6:00 PM
Cell A2 05-Jan-12 4:45 PM
Cell A3 0 22:45 (formula: =A1-A2)
Wat shud i do 2 not display the "zero" values i.e. no. of days in this case is zero hence the cell shud display " 22: 45" and not "0: 22: 45".
@Amol
Try the Custom Format code:
[
<1] hh:mm ; [>=1] d “d” hh:mmHi Chandoo,
If possible to compute the interval of time and date in one column.
In column C I would like to compute the total days and hours . What formula ? Please help
Example.
Column A Column B
2/13/12 3:30 AM 2/14/12 12:00 AM
In referenc to Elapsed time in months
To calculate the elapsed time in months, we can use the formula =(NOW()-A1)/30. This returns the value in 30 day months.
I use to apply formula =ROUND((TODAY()-A1)/30,0). Today, I faced a peculiar situation, A1 has date 01-Mar-2009, and today being 01-Mar-2012, it should be 36 months, but it is showing 37 months!!
Any suggestions to avoid such errors?
Regards,
Prasad DN
All I want to do is add up a series of times and receive a reply that gives me a total. What I used to do was subtrace the end time from the start time and format the result as [hh]:mm but this doesn't seem to work anymore. How has Bill Gates confounded me?
@Pete
I use Excel 2010 and it still works
The times must be entered as times in the format hh:mm:ss or hh:mm without seconds
Adding up times is as simple as =Sum(Range) or =Sum(A2:A10)
then using a Custom Number format as you have mentioned [h]:mm
If this isn't working, 2 ideas
1. Check your times are times and not text
2. Can you share your data or file with us?
My hospital tracks times from patient arrival to various procedures or treatments. When those times cross over midnight, the regular formulas (2nd time minus first time) don’t work because the result is negative and Excel (2007) won’t show a negative number in time format.
I couldn’t find a solution here (chandoo.org) but found one elsewhere that worked and it’s very simple. I would like to share it.
Assuming 1st time in A1 (column for patient arrival time) (11:00 PM), and 2nd time in B1 (column for x-ray given) (12:30 AM)). Should be 1:30 elapsed time.
=B1-A1+(B1<A1) [This comparison is the key to the solution.]
=12:30 AM – 11:00 PM + (12:30 AM < 11:00 PM)
=0.0208 – 0.9583 + (True)
=-0.9375 + (1) [This is the key! If it is false, Excel adds 0. If it’s true, Excel adds 1 and that is what corrects the negative number. Now Excel can interpret the number as a time.]
=0.0625
Converted to hh:mm = 1:30
I wrapped this formula inside an IFERROR one to alert my data entry person if she messed up and applied it to lots of different columns and it has worked wonderfully. No more complaints from the data entry person who just plugs in times from medical charts.
Very interesting solution. Thank you so much for sharing it with all of us.
HI,
I am working on a Xl application..
I want to capture time between two clicks.
Ex, in my application during run somewhere I press OK button and then I click Cancel.. I want to measure time between these two clicks... Is it possible??
Pls help on this...
@shashidhar
The answer is Yes
You will have to add an appropriate VBA event to start and stop a timer.
There are techniques which can time to the millisecond so maybe look those up on the net
WOW!!!!!! I truly love your excel time format program! WHOOOO! I am very interested in how the time formats "update" (manually on a physical keyboard) that "updates" the time into its respective decimal time formats, such as:
YYYY.yyyy, HH.hhh, etc...
How do those formulas or equations work if not in Excel mode? Example: TI calculators, Word, or any other computer language programming? Just wanted to see how it works. E-mail me at Ultra64848689Ti@gmail.com.
Thanks again for an EXCELLENT Excel program into decimal time formats!
Here's an idea: how about creating an APP for iOS and Android? Just wanted to point that out. =-D
Regarding the elapsed time in months:
I made this function to determine the time elapsed since a date using the number of days in each respective month. It's a simple subtraction and I think it works very well:((Year Today-Year A1)*12++(Month Today - Month A1)+(Day Today/Days in Month Today)-Days A1/Days in month A1)
Here's the function:
=((YEAR(TODAY())-YEAR(A1))*12)+(MONTH(TODAY())-MONTH(A1))+(DAY(TODAY())/DAY(DATE(YEAR(TODAY()),MONTH(TODAY())+1,0))-DAY(A1)/DAY(DATE(YEAR(A1),MONTH(A1)+1,0)))
Have a Merry Christmas everyone!!
I need the ability to calculate how much progress we have made between two dates and I want to represent that as a percentage.
I am thinking this would be a combination of today, networkdays & dividing the days elapsed vs the total days. Then it should be as easy as formatting my cell. Any help would be greatly appreciated.
@Christian
Your correct
dates are just numbers and so you can use simple math to derive the percentage
=(Date Now-Start Date)/(End date-Start date)
that will give you a number between 0 and 1
which you can format as a %'age
is there a way out to calculate the productivity for an employee
The day start is at 08:00 and day end is 20:00
The start date / time is recorded and end date / time is recorded
I want to calculate the timelapse taking into consideration the day begin and dayend time.
If the work begins and ends the same day, a simple formula b1-a1 would compute the productivity.
But if the process remains incomplete and is carried over to the next day, then timelines to be computed accordingly
to clarify,
if start time of an activity is 03/15/2015 18:00 hrs and end time is 03/16/2015 11:00 hrs, then the resultant formula should be 5 hrs (ie 18:00 to 20:00 hrs on day1 + 08:00 to 11:00 hrs on day2) ie 2+3
please guide.
Venkatesh, try (b1-a1)-0.5
This will subtract the fixed amount of time between shifts, 12 hours. If the time between shifts varies, then you could reference other cells that contain the variables.
Please help. when I use the networking days formula I get a date (2-may-00) I want actual number of days. I managing projects and I need to know how many days have passed since we received a project to the current date. Please help Thanks
@Aria: Just format the cell as general or number. that will fix the problem.
You rock! I looked at 17 other sites and they all did not work. Yours did. Thanks!
Hi folks ...
calculating age in years , months and days
=text(now()-a1,"yy")&" y " &text(now()-a1,"mm")-1 &" m "&text(now()-a1,"dd") & " d"
Hi, the Elapsed time in days [ =TODAY()-A1 ] works great however, if I do not have a date in A1, it shows 42157. Anyway to get it to display 0 or a Null value?
@Dan
=If(A1="",0,TODAY()-A1)
I get #NAME? and the formula does not work.
Hi Chandoo,
This might be a challenge - I am looking to calculate elapsed time between two columns
Start date Complete date
9/9/2015 7:21 10/2/2015 11:01
I need to take into account the following:
1) The employee works 7:00-3:15 pm each day
2) Std Work hours are 7hrs 45 min each day
3) Need to take into account all holidays in between start and end date
4) Work week is Mon through Friday.
Can you help?
Thanks!
Hi, i have a certain name (wilium) in column A and against this name i have 2 option, 1 Done and 2 Inprogress. i want that i count done again wilium and count inprogress against wilium separately. which formula will work for it??
Hi, i have a certain name (wilium) in column A and against this name i have 2 option, 1 Done and 2 Inprogress in column C. i want that i count done again wilium and count inprogress against wilium separately. which formula will work for it??
Year, month, day results for DoB.
The formulas I have found on the net and the datedif function do not work. This is what I came up with using a Microsoft support paper dated April 1997 with some modifications:
IF(OR(A2>$A$1,ISBLANK(A2)),"",IF(YEAR($A$1)=YEAR(A2),0,IF(MONTH($A$1)>=MONTH(A2),YEAR($A$1)-YEAR(A2),YEAR($A$1)-YEAR(A2)-1))&" years "&MONTH($A$1)-MONTH(A2)+IF(AND(MONTH($A$1)<=MONTH(A2),DAY($A$1)<DAY(A2)),11,IF(AND(MONTH($A$1)=DAY(A2)),12,IF(AND(MONTH($A$1)>MONTH(A2),DAY($A$1)=DAY(A2),ABS(DAY($A$1)-DAY(A2)),DAY(EOMONTH(A2,0))-DAY(A2)+DAY($A$1))&" days")
Check it out...
Hi, Augustin
what about :
calculating age in years , months and days
=YEAR(NOW()-DoB)-1900 & " y " & MONTH(NOW()-DoB)-1 & " m " & DAY(NOW()-DoB) & " d"
Hi Chandoo,
I am looking for help with the elapse time formula. I have a recruitment tracking sheet where we track the number of days the positions are opened, and when they are finally closed.
The opened positions will have a running turnaround time (TAT) formula and I am using this formula:
=NETWORKDAYS (start_date, TODAY (), Holidays2018)
Now, without disrupting the running TAT formula, how do I then get the TAT to stop when we have a final end date? All the information below is row:
- start_date --> Cell A
- TODAY () --> cell B
- end_date --> Cell C
Hope you are able to help. Thanks!
Interesting question. Try this:
Thank you for this helpful article. I was trying for days now to figure it out. Now the only issue I have is that if I do not have a value inputed for =TODAY()-[@[Date Precured]] Date Precured then it shows 44055. How can I get it to leave it blank if there is no data? Thanks again!!!