This is the story of Vijay Agarwal, who received MVP Award from Microsoft on 1st of April.
Some of you know that I am a recipient Microsoft MVP award. It is an award Microsoft gives to software community leaders & contributors. Often people ask me, “Chandoo, how do I become an MVP?”. So today I want to tell you how you can become an MVP.
Around first week of April, I got an email from Vijay,
Hi Chandoo,
My self Vijay Agarwal from Delhi and I am a big fan of your site/articles. With blessing of God and inspiration from legends like you, I am pleased to inform you that yesterday evening I have been awarded Most Valuable Professional (MVP) award by Microsoft for my contributions in Excel.
This is the link of Microsoft site where it has been updated.
I congratulated him immediately. It is always a pleasure to see people succeed and get recognition for their efforts. I also asked him if he can share his MVP journey to inspire all of us at Chandoo.org. Vijay being an awesome guy, wrote and send it promptly. So here we go.
My ‘MVP’ Journey
1st April 2014, the day, which I would never forget in my life as Microsoft has awarded me Most Valuable Profession Award (MVP) for my Excel skills which undoubtedly is the ‘Nobel Prize’ in Microsoft community.
Can a person ever think of such a feat…,
- who spent his childhood in a very small town of Haryana (a state in India)
- who completed his graduation in Hindi medium only
- who never heard or saw a computer before his graduation
- who touched a computer only after completing his CA in 1993
Really really it’s a long story, how and when I fall in love with Excel even I don’t remember. I believe it was 1998. Being a Chartered Accountant and good in mathematics/logic I found myself spending more and more time on it and within few months, I was the ‘Excel master’ in my company. I never had any type of training on any of MS product, whatever I learn that was just by reading Excel help (its too good, that is written by experts, never ignore it), doing and doing and helping others. In the mean time, I moved to ERP/SAP line and also got lot of proficiency there, but, yes Excel was always with me. Till 2009, I used to get people coming to me for Excel queries, and used to got calls from my colleagues of previous companies.
I was not much involved on any type of forums on internet till 2009, then I became one of the members on http://answers.microsoft.com/en-us/office in 2010 and started to see people answering very tough/complicated questions. There are people who are more experienced and legends on these forums and moreover very good in Macros, me not a technical person, I hardly used macros, but being good in logic I started to answer questions even which people thought is possible through macros only, by building logic and providing non-macro solutions. It was not frequent, but my response also got “marked as answer”, and it was in 2012 last quarter that I was tagged as Star Contributor, after that I just got addicted to solve more and more questions, and the result is in front of you.
I don’t prefer Macro/array solutions much and always try to find some simple Non macro/non Array solutions which I believe users like.
I remember one quote of Steve Jobs here.
“Simple can be harder than complex: You have to work hard to get your thinking clean to make it simple. But it’s worth it in the end because once you get there, you can move mountains.”
While answering questions I try to make things simple and follow these rules.
- Will my solution meet the requirement of user
- Can it be more simplified/compact and made better
- Is there any alternate solution for this
- Is it user friendly
- Would it be better to provide Screen shots/File Link
- To the point/brief
- And then I try to follow all above rules while answering questions
I believe one should have passion/belief for a subject and then he will automatically find the time/ways for it. MVP is not the destination; I do it because I love it. It gives lot of satisfaction when one get compliments for your responses. There is no short cut to hard work. Do what you love and love what you do so that you don’t feel bored/burdened.
Beside Excel I am fond of yoga, give motivational speeches and travel.
I am thankful to God for giving me such a beautiful life.
Wish you all the best and feel free to get in touch with me thru my MVP page or Microsoft Answers page.
Thank you very much Chandoo for giving me an opportunity to write on your blog.
I learnt and learning a lot from Chandoo.org
keep it up, God bless you.
Thank you Vijay
Thanks Vijay for sharing your story and inspiring us. I agree with you that as long as we make our life about learning & sharing, it will be challenging and beautiful. Thanks for taking time to write for us. Many congratulations once again on the much deserved MVP award. Wishing you many more years as MVP.
If you enjoy Vijay’s story, please say thanks to him or congratulate him.
More on MVP Award
- Chandoo becomes MVP
- Hui becomes MVP
- Microsoft MVP Award website
- Chandoo.org Forum (to share your knowledge or ask a question)
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)
I'm not sure why but this web site is loading very slow for
me. Is anyone else having this issue or is it a problem on my end?
I'll check back later and see if the problem still exists.
[…] Project Finance Modeling using Excel – Part 1 & Part 2 […]
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.