Introduction

This chapter consists of a selection of different business plans that illustrate a range of spreadsheet techniques which readers may find helpful when developing their own systems. The business applications that have been selected for discussion in this chapter represent only a small number of the possible business spreadsheet applications and the areas chosen are:

• capital investment appraisal (CIA)

• break-even point analysis

• learning curve costing

• economic order quantity

• sales campaign analysis.

For each of these examples the spreadsheet development approach and the key formulae are explained in detail in this chapter. However, it is strongly recommended that readers study these plans in conjunction with the accompanying CD.

Capital Investment Appraisal

The CIA model described in this chapter uses both discounted and non-discounted techniques.

Discounted techniques are based on the time value of money. By this it is meant that cash received today is more valuable than cash received at future dates. The rationale of this assertion is that cash can be invested as soon as it is received and thus immediately begin earning a return. Therefore, the longer it takes to receive a sum of money, the less value that sum represents in today's terms.

Discounting techniques for CIA reduce amounts paid and received in the future to the equivalent amount paid and received today.

This is achieved through...