explain what if scenario with example give me the answer fast
Answers
Base case scenario – It is the average scenario, based on management assumptions. An example – when calculating the net present value, the rates most likely to be used are the discount rate, cash flow growth rate, or tax rate.
Worst case scenario – Considers the most serious or severe outcome that may happen in a given situation. An example – when calculating the net present value, one would take the highest possible discount rate and subtract the possible cash flow growth rate or the highest expected tax rate.
Best case scenario – It is the ideal projected scenario and is almost always put into action by management to achieve their objectives. An example – when calculating the net present value, use the lowest possible discount rate, the highest possible growth rate, and the lowest possible tax rate.
The steps to perform are :
1. List the assumptions you want to create scenarios for.
2. Copy and paste the list of assumptions according to the number of scenarios you wish to have.
3. Fill in all details of each scenario.
4. Ensure the layout of all three scenarios is identical.
5. Create a new section called “Live Scenario.”
6. Use Excel’s CHOOSE function to switch between selected scenarios (of the OFFSET function).
7. Link the “Live Scenario” numbers directly into the financial model.