What-If Calculation

Filed Under » ,
Dictionary Says

Definition of 'What-If Calculation'

Calculations for testing a financial model using different assumptions and scenarios. What-if`calculations enable the forecaster to check the variance in end results for a financial model using various hypothetical levels for inputs such as interest rates and exchange rates. These calculations are generally performed with spreadsheet software. What-if calculations can also be referred to as sensitivity analysis or stress testing.
Investopedia Says

Investopedia explains 'What-If Calculation'

In a discounted cash flow model used to assess the viability of a project, changes in the discount rate can lead to wide ranges in the net present value of the project. The key benefit of what-if calculations in this case is that they can test the viability of the project under various scenarios. What-if calculations are similar to a sensitivity analysis, and should not be confused with the "IF" function in excel.

Articles Of Interest

  1.

    DCF Valuation: The Stock Market Sanity Check

    Calculate whether the market is paying too much for a particular stock.

  2. Bet Smarter With The Monte Carlo Simulation

    This technique can reduce uncertainty in estimating future outcomes.

  3. Top 3 Pitfalls Of Discounted Cash Flow Analysis

    The DCF method can be difficult to apply to real-life valuations. Find out where it comes up short.

  4. Weighted Average Cost Of Capital (WACC)

    Weighted average cost of capital may be hard to calculate, but it's a solid way to measure investment quality

  5. How Interest Rates Affect The Housing Market

    Understand how rate changes can affect home prices, and learn how you can keep up.

  6. Exploring The Current Account In The Balance Of Payments

    Learn how a country's current account balance reflects the country's economic health.

  7. Choose A Fund With A Winning Manager

    We break down the key components of analyzing a fund manager's performance so you can find a winner.

  8. Taking Shots At CAPM

    Find out why many investors think the capital asset pricing model is full of holes.

  9. George Soros: The Philosophy Of An Elite Investor

    George Soros spent decades as one of the world's elite investors, and even he didn't always come out on top. But when he did, it was spectacular.

  10. Understanding And Playing The Dow Jones Industrial Average

    Learn strategies for investing in this price-weighted index and how to interpret its movements.
comments powered by Disqus
Marketplace
Hot Definitions

  1. Yield Elbow

    The point on the yield curve indicating the year in which the economy's highest interest rates occur. The yield elbow is the peak of the yield curve, signifying where the highest interest rates occurred.

  2. Xenocurrency

    A currency that trades in markets outside of its domestic borders.

  3. Wanton Disregard

    A standard of severe negligence. Wanton disregard is a very serious accusation that indicates that a person behaved extremely recklessly.

  4. Ultra ETF

    A class of exchange-traded funds (ETF) that employs leverage in an effort to achieve double the return of a set benchmark.

  5. Toehold Purchase

    A purchase of less than 5% of a target company's outstanding stockmade by an acquiring company. A toehold purchase of just under 5%, while not a significant stake in a firm, allows the shareholders a "toe-holds" grip on the company and its decision making.

  6. Samurai Bond

    A yen-denominated bond issued in Tokyo by a non-Japanese company and subject to Japanese regulations.
Trading Center
http://sp.fastclick.net/ad/tr/10858-64082-15546-0?mpt=04aed227636b55cca4048c06b0e36129