Imagine you work at MI5 as a HR officer. You want to find all agents who have license to kill (licence 7). Your data looks like this:
How would you go about it?
If you filter the list or use FIND() or SEARCH() formulas, you will end up with agents who also have licenses 77, 17 or not7. So how would you solve this problem?
Of course, you do what any smart person does. You summon Excel and ask it nicely by using some wicked pattern matching logic.
Finding all cells with 7 in them
Assuming the licenses are in column [licenses], you can use below formula to check if it has 7:
Step 1: Make an extra column, say [Two more commas] and use this formula.
=", "&[@licenses]&", "
Step 2: Now use below formula to find if a license has 7 in it:
=COUNTIFS([@[Two more commas]] , "* 7,*") > 0
This formula returns TRUE if [@licenses] has 7.
So how does it work?
There are three cases for licenses with 7 in them, as shown below.
Once we prefix & suffix COMMASPACE to this, we end up with a text that has the pattern:
<COMMA SPACE number><COMMA SPACE number>...
Now, we simply look for the pattern SPACE7, in this by using the * wildcard along with COUNTIFS.
=COUNTIFS([@[Two more commas]], "* 7,*")
We add a check to see if the count is greater than ZERO (ie did we find the pattern?)
So there you go. Now you can find the agent who can nab the targets.
Related: Using wildcards * ? in Excel VLOOKUP & other functions | Introduction to SUMIFS formula
Adding a few plot twists
Now, your MI5 career would be awfully boring, if there are no plot twists. So Q calls you in to her office and says, “We need a list of all agents who have any of the licenses 7, 65 or 63. Oh, while you are at it, tell me which agents have all three licenses.”
Damn you Q
the evil is you
for making me do
work I don’t want to
Damn you Q.
Added later: Okay, My James Bond knowledge is not very good. M is the boss of MI5, not Q. So let’s assume M calls you in to her office and gives you this task. As usual, you go:
Why do this M?
Everything is ho hum
and then you come
to tell my work is not yumm
Why do this M?
So you are back to your desk. Now the licenses to find are in a named range called list.
You can use COUNTIFS() pattern find logic to get the answer.
For sake of simplicity, let’s assume that you have a new column in your data table called as [Two more commas]
Does the agent have any of the licenses in list?
=SUMPRODUCT(COUNTIFS([@[Two more commas]],"* "&list&",*"))>0
The internal COUNTIFS returns an array of values, which the SUMPRODUCT simply adds up.
Does the agent have all of the licenses in list?
=SUMPRODUCT(COUNTIFS([@[Two more commas]],"* "&list&",*")) = COUNTA(list)
Now, let’s hope Q doesn’t add more plot twists. And if she does, you can always post them in the comments so internet can solve them.
Related: Introduction to Excel SUMPRODUCT function
How would you find license to kill?
I am sure COUNTIFS is not the only way to do this. So what would you do in this case? Will you use formulas / VBA or Power Query? Or something else altogether? Go ahead and share your approach in the comments section.
Note: Thanks to Brian who emailed me this problem.
15 Responses to “Modeling Interest During Construction (IDC) – Excel Project Finance”
Thanks again for a very helpful post.
I had a similar problem when trying to model a balance sheet and profit and loss projection. The problem was that interest expense (in P&L) was dependent on a cash shortfall (in BS) which had to be funded. The cash shortfall depended on how much interest was paid, so the mutual dependency made a circular reference.
I addressed it with a macro that calculated interest outside of the P&L, then pasted the calculated amount into the P&L as a value. The model was out of balance, but by repeating the pasting and calculating loop the imbalance reduced to zero. It was a bit messy, and had to be repeated every time a line changed - but it worked.
If I have to do it again I'll read this article again first and see if it can be done more elegantly.
Hi,
The use of a circular reference can be avoided in this case. Just make use of the geometric sum to calculate the interest required. I’ll walk through the example from the spreadsheet.
First calculate the cash needed each year without the interest expense. So you year 1 you need 55 Mn, year 2 105 Mn, and 190 Mn for year 3. The total amount to borrow for year 1 is then (50 Mn)/(1-interest_rate) = (50)/(1-0.1). For years 2 and subsequent the amount borrowed is the cash needed in that year plus the interest_rate times the amount already borrowed. For year 2 (105 + interest_rate * sum(previous debt raised))/(1-interest_rate)=(105+0.1*61.1)/(1-0.1).
This process avoids the need for a circular reference, and makes the calculation more stable.
Thanks,
Tristan
The question is for the year 1 in your case, the amount works out to 45 mn. However in the year 2 you have applied the loan amount as 61.1 mn.
Am I missing something ! Please help !
very helpful information!!!
using circular references and to make model more stable we can use combination of "IF" and "ISERROR" functions. i.e
=if(iserror(formula1),"",(formula1))
this formula will return blank value if there is any error otherwise give the result required.
I usually use this in my models and it makes them very stable......
🙂 🙂 🙂
@Terry: Thats right. Exactly same problem is seen in Interest - Cash cycle in P&L and Cash Flow statement as well. In our trainings on financial modeling in excel, we demonstrate using both the circular loops as well as the macros to take care of this problem. Circular loops have their own pitfalls. If the model enters into a state of error, the error percolates!
@Tristan: Thanks for pointing out. I agree with you that if circular loops can be avoided, they should be avoided.
@Yogesh: This is one way of avoiding the problem. Although circular loops have another problem that they make your sheet slower. Each time, there is a change in the sheet, all the calculations are redone. So if they can be avoided, they should be avoided.
Please note that this was an example (a large one indeed) and I didn't have space to speak about the pitfalls of this approach! I just wanted to illustrate an approach and am glad that some of you found it useful!
I think while posting, there is an error in the images! The last image should be flipped with the one that is posted in step VII!
I think you can try the following simple solution given by Microsoft itself to make the circular works:
Windows: Excel Options -> Formulas -> Put a tick on "Enable iterative calculation"
Mac: Excel -> Preference -> Calculation ->Put a tick on "Limit iteration"
You can change the maximum number of calculation iterations as well as the maximum changes which iteration stops for goal seeking or for resolving circular references based on the number you type in the maximum change box.
Thank you.
Hey All
I heard that we can take care of the circularity with the help of macro for IDC. Can anybody help on the steps to construct the macro for the same.
Regards
Vinay
Hi Vinay,
If you look closely, you are essentially copying the values from the interest calculation to the IDC in project cost.
Basically you can record a macro, that takes the values from interest and pastes special the values in IDC row in project cost.
Then you can run that recorded code in a for loop.
Hope this helps.
Thanks Param for reply.
But before calculating interest, i need to provide for Upfront Equity and Equity, which are essentially part of total project cost. Hence, i need to put in Upfront Equity and Equity to calculate the IDC which is again hitting the total project cost.
Bit of confused on how to remove this circular reference.
Regards
Vinay
Wow, this was a brilliantly simple post. I was looking online for a while before I found this page. Never seen this been explained so beautifully yet so crisply before. Thanks for saving my ass at work! (i'm relatively new to finance + modeling)
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I have been reading your blog since my college days. Today, I'm writing just to say thanks.
We have calculated Financial Rate of return of a hydropower projects, and the observer has raised an observation regarding Total Project cost with IDC Rs. 8616.01 million (PKR) and with-out IDC 8352.46 million (PKR). How does the Financial nalysis be calculated on the basis of with-out IDC Or With IDC?????
Please helpf. if possible to spare some time.