In October 2008, I have started an ambitious series of posts on this blog called – Spreadcheats. These are little tricks, nuggets, tutorials on using Excel that would make anyone a spreadsheet guru.
The spreadcheats series has been wildly successful. I am compiling all this useful information and articles in to one big post so that anyone can follow the links and become good in Excel. Read on,
[Note: This is not for beginners. If you know what a formula is, you would enjoy this 31 articles]
1: Insert Line Breaks in a Cell
Press ALT+Enter keys in a cell to make a new line inside the cell. [Read this]
2: Select all cells in a range
Use these keyboard shortcuts to select all the cells in a range or group. You can find 90 more shortcuts on that page. [Read this]
3: Using Mouse in Excel
Many of us know at few keyboard shortcuts. But what about mouse short-cuts? Read this post to learn interesting mouse shortcuts that can boost your productivity. [Read this]
4: Using Mouse in Excel – Part 2
In the second part of Mouse shortcuts, we explore double click tricks in Excel. [Read this]
5: Save time by using chart templates
In this spreadcheat, learn how to make your own chart templates and re-use them to save time. [Read this]
6: Make ToC (Table of Contents) in Excel – and other tricks
We all run in to large excel workbooks one time or other. Read this post to find out how you can manage when you have a large file. [Read this]
7: How to print spreadsheets one just one page?
Use the little trick in print settings to print any worksheet on just one page. [Read this]
8: Write better formulas by knowing the difference between relative and absolute references
Quick, what is the difference between A1 and $A$1? If you said 2 dollars, you are the right person to read this article. Learning the differences and usages of various reference types in Excel is important if you want to write better and simpler formulas. [Read this]
9: Remove duplicate items using formulas
Learn how to remove duplicates, identify unique values etc. using formulas in this article. [Read this]
10: Introduction to VLOOKUP Formula (and MATCH, OFFSET Formulas)
VLOOKUP remains one of the most important and very useful formulas in Excel. Learn how to write vlookup formulas by reading this article. [Read this]
11: Introduction to 3D References in Excel (a tutorial on Employee Satisfaction Surveys in Excel)
In this tutorial, we will explore a feature called 3D References in Excel and build an employee satisfaction survey form in Excel. [Read this]
12: Introduction to SUMPRODUCT formula
Learn how to use SUMPRODUCT to find sum of values that meet more than one condition. [Read this]
13: Introduction to ROWS and COLUMNS formulas
One of my recent favorites, ROWS() formula is very useful to generate sequential numbers in Excel. [Read this]
14: Calculate Moving Average in Excel
Use excel formulas and relative references to calculate moving average from your data. [Read this]
15: Introduction to FREQUENCY formula
We use FREQUENCY formula in Excel to generate statistical distribution of a set of values in this example. [Read this]
16: How to understand and fix excel formula errors
If you are ever perplexed by #N/A, #NAME! and said #$#@ to excel, this is the article for you. Read it to learn what these errors actually mean and how to fix them. [Read this]
17: Quick tip to Debug Complex Excel Formulas
Use Function key F9 to debug lengthy and complex excel formulas. Select a portion of the formula and press F9 to instantly evaluate that portion and see the result. Read this article to find out how to use this trick. [Read this]
18: Use Find / Replace tool to change formulas
Learn how to use Find / Replace tool in Excel to quickly edit formulas and change them. [Read this]
19: Introduction to COUNTIF and SUMIF Formulas
COUNTIF and SUMIF are very simple yet very powerful formula tools for anyone using Excel. In this article, explore these formulas and learn to use them. [Read this]
20: Introduction to Array Formulas in Excel
Array formula is like a mega formula that would work on an entire range of cells and return another range of cells. They are useful for scenarios where the output we need is not one value but a set of values. In this introductory example, learn how to write your first array formula. [Read this]
21: Introduction to Excel Conditional Formatting
Excel conditional formatting is your way of telling excel to highlight / change formatting of cells that meet certain criteria. This is a good way to draw attention to few points from a large table. Learn how to use Excel CF in this introductory article. [Read this]
22: Introduction to Excel Camera Tool
In this article, learn about Excel Camera (or Snapshot) tool which is useful for making a live snapshot of a range of cells. [Read this]
23: Introduction to Excel Pivot Tables
Pivot tables are a powerful way to analyze and report your data. In this introductory post, you will find all the basics of pivot tables and learn some tricks. [Read this]
24: Introduction to Excel Goal Seek
Goal Seek is opposite of formulas. In formulas we tell excel a bunch of values and excel finds the result. In goal seek, we tell excel what the result should and excel tells us what kind of parameters should be given. This is useful to find, for eg. Your retirement nest egg value … [Read this]
25: Introduction to Combination Charts in Excel
Learn how to combine 2 different chart types in to one chart in this article. [Read this]
26: Make a Dynamic / Interactive Chart using Data Filters
Do you know that we can use data filters to filter charts as well as data? Well, in this article, you can learn a powerful yet simple trick to make a dynamic chart in Excel using data filters alone. [Read this]
27: Make a Dynamic / Interactive Chart using INDEX Formula
Learn how to set up a dynamic or interactive chart using INDEX formula and Camera tool in Excel. [Read this]
28: Make Collapsible Charts using Group – Outline Tools
We can collapse / expand charts using the group and outline tools in Excel. Learn how to set up such a collapsible chart in Excel. [Read this]
29: Showing Chart Labels in Different Colors – Charting Tricks
Learn how to use custom cell formatting codes to show chart labels in different colors based on a criteria. [Read this]
30: Advanced Data Validation Tricks in Excel – Part 1
In part 1 of excel data validation tricks, we will learn how to use excel formulas to control the way data validation works. [Read this]
31: Advanced Data Validation Tricks in Excel – Part 2
In part 2 of data validation tricks, we will learn how to prevent duplicate data entry using data validation formulas. [Read this]
Happy learning 🙂
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.