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Trial and error is time consuming. Goal Seek fixes that.
Goal Seek is a simple tool in Excel that lets you go straight to the answer and set it to anything you want. Excel then works backwards and evaluates what input value is required in order for the answer to be achieved.
Let’s start with a really simple example - a classic sales calculation.
Now, let’s say we want to reach a revenue of $300.00,
Assuming the same quantity of widgets are ordered, what would we need to increase the price to?
OR … assuming we sell widgets at the same price, what quantity would the customer need to order?
Here’s the spreadsheet:
Here’s how we would use Goal Seek to calculate the new PRICE.
This tells us that we would need to increase the price from $0.13 to $0.15 to achieve our revenue target of $300.00
At this point you can click OK to keep the new price or Cancel to revert back to the original value.
Let’s use Goal Seek again to calculate the new QUANTITY.
This tells us that we would need to increase the quantity to 2,308 (rounding up the decimals) to achieve our revenue target of $300.00
A mortgage repayment has 3 contributing factors
Here’s the spreadsheet, already populated.
This is a quick breakdown of the PMT function.
Notice how all the figures were adjusted to work on a common MONTHLY basis (i.e. B2/12 and B3*12).
There is a minus sign in front of the Present Value (PV). This makes it negative, which makes the final repayment figure positive.
Anyway back to Goal Seek!
The current monthly repayment based on these figures is $2,347.
Let’s say you get a pay rise and you can now afford to pay $2,600 instead of $2,347.
Using Goal Seek you can discover 3 things:
Let’s answer those questions.
The amount you can borrow has increased from $450,000 to $498,421.
And setting ‘By Changing Cell’ to B2 … The interest rate could rise from 4.75% to 5.66%.
And setting ‘By Changing Cell’ to B3 … The term reduces from 30 years to 24.37 years.
So that’s Goal Seek. A simple tool that provides incredible functionality and purpose.
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Cheers. Here's to your learning and success. Enjoy the rest of your day.
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