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Power-Worksheets is a user-supported program which relieves you of the
need to set up (or program) and test 1-2-3 worksheets. A collection
of financial calculators, the worksheets are easy to use,
sophisticated and well graphed. Also included is a phone databes and
Desktop-like appointment calendar. Over 70 pages of documentation is
included with this disk, which is actually one of two disks available.
Disk #2, which contains additional graph-supported worksheets, is
available for $49 from the author.
System Requirements: 265K, two disk drives, LOTUS 1-2-3 v2.0
How to Start: Access through LOTUS 1-2-3
Suggested Registration: $49 (includes printed manual and second disk)
or $5 per worksheet.
File Descriptions:
AUTO123 WKS Lotus autostart file
README 1ST Descriptions of worksheets on this disk
AGENDA WKS Allows you to go from one worksheet to another.
BSTAT WKS Accepts data and performs two major analytical tasks.
ROR WKS Another calculation program.
PROFIT WKS Analysis worksheet.
NPV WKS Calculation program.
DEPREC WKS A comprehensive worksheet.
SREGR DOC Part of documentation (33K)
ROR DOC Part of documentation (27K)
PROFIT DOC Part of documentation (44K)
NPV DOC Part of documentation (20K)
DEPREC DOC Part of documentation (24K)
BSTAT DOC Part of documentation (18K)
INTRO DOC Introduction ( 6K)
PRINTDOC BAT Prints 72 pages of documentation
SREGR WKS Linear Regression program
TV WKS Part of Power Worksheet
TEST WKS Test worksheet
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BSTAT - Basic Statistics Calculator
1. INTRODUCTION
This worksheet provides some basic statistical tools which
can be used to quickly analyze up to 6 sets of data.
For each data range, the statistical results are displayed in
the Results Block. These results include:
No. of Observations
The number of observations for each data range is counted
and displayed.
Maximum
The maximum value in the data range.
Minimum
The minimum value in the data range.
Range
The range of values. i.e. the difference between the
maximum and the minimum.
Mean (Average)
The arithmetic mean or average obtained by adding up all the
values in a data range, then dividing the total by the
numbers of observations.
Standard Deviation
The standard deviation is a measure of dispersion or
"average difference" from the average value of a data range.
The standard deviation in the Population Statistics section
reflects the actual standard deviation in the data. The
standard deviation in the Sample Statistics section
represents a prediction about the estimated standard
deviation of a much larger population, based on the
assumption that the data contained in the data range is a
representative sample from that larger, but unseen,
population.
Variance
The variance is the square of the standard deviation.
2. USING BSTAT
The main menu of BSTAT offers you seven choices (plus Quit).
They are as follows:
Input
This option allows you to specify the maximum number of
observations you will eventually enter. It then exits to
"raw" 1-2-3 to allow you to input up to 6 data timeseries,
either manually or using a file operation.
09/09/84 BSTAT - 1
Blank
You should choose this option if you have finished with the
data in the worksheet and want to start again with an empty
worksheet. Note that this option wipes out all calculated
results as well as the raw data. (You must confirm this
choice to reduce the risk of accidental erasure.)
Calc
Make this choice when you want to calculate or recalculate
the results. If you have changed data or entered more data
since you last calculated, you must recalculate before
displaying new results or graphs.
Results
This option centers the Results Block on the screen for easy
viewing of all statistical results for all 6 data ranges.
Graph
This worksheet contains a comprehensive graphics capability
which will allow you to define up to 42 distinct graphs.
See the Graph Details section below for more information.
Print
The print option sends the contents of the worksheet to the
printer. The entire worksheet will be printed
automatically.
Agenda
If you select this option (and confirm it when requested),
the current worksheet is lost and replaced by the main
agenda. Then you can load another worksheet from the disk.
Note confirmation is required before this option proceeds,
because it will overwrite the worksheet in memory.
2.1 Input Details
Input first asks you to "Enter Max. Number of Observations"
which you expect to be working with. The worksheet requires this
estimate in order to precondition itself before you enter the raw
timeseries, either manually or by a file operation.
If you expect approximately 100 values to be entered you may
specify the "...Max. Number of Observations" to be, say, 300.
There is no need to be precise in answering this prompt as long as
this number is larger than the total number of timeseries data
points which you intend to enter.
After specifying the maximum number of observations, press
the Enter key. There will be some activity on the screen and the
leftmost column will be filled with numbers ranging from 1 to the
maximum number which you specified. This is a handy feature to
keep track of your position if you must enter many numbers
manually. Later on, during the Calc operation, the leftmost
column will be scaled again to match the actual number of
09/09/84 BSTAT - 2
observations entered.
You will notice that the cursor is now positioned under the
column labeled "Range 1". You will also be aware that the menu
has disappeared from the top of the screen. You are now in "raw"
1-2-3 mode and are free to enter timeseries data in one or more of
the Range columns. This can be done manually or using 1-2-3 file
commands. There is no need for the number of observations in each
range to be equal since the statistical results are calculated
independently for each range.
The amount of data which you can enter is only limited by
your computer's memory and 1-2-3's limit of about 2000 rows.
When you have finished entering data, simply use the Alt-M
keystroke combination to bring back the main menu. Normally, your
next action will be to choose the Calc option.
2.2 Calc Details
Activating the Calc option results in a very busy looking
screen as a number of important procedures are carried out by the
worksheet. It is not necessary for you to be aware of these
automatic operations but they are briefly described here for your
information. First, the number of newly entered observations are
counted and recorded in Row 9, and the numbers in the leftmost
column are re-scaled to match the number of entries in the longest
data range column. Next, various formulas are copied into the
Results Block area. Finally, a sequence of ranging procedures is
carried out in order to define graph ranges. This graph ranging
is performed during the Calc operation in order to save
considerable time later on during the Graph procedures.
When the Calc operation is completed, the main menu re
appears at the top of the screen.
Following completion of the Calc procedure, the statistical
results contained in the Results Block are ready for viewing. In
addition, the Graph option may be used to visually investigate
various combinations of data ranges.
2.3 Graph Details
The Graph option first asks you to specify either a Color or
a Black & White (Monochrome) monitor. Once this choice is made
you are presented with the first of 8 graph menus which allow the
selection of different combinations of the data ranges which are
to be plotted. Refer to the menu tree map at the end of this
section to see the options available. Also, note that except for
the first graph selection menu, all subsequent menus have choices
beginning with A, B, C, etc.. in order to allow the selection of
each option using only one keystroke, according to standard 1-2-3
practice. As desired, move between graph menus using the NextMenu
and PrevMenu options.
09/09/84 BSTAT - 3
Any graph can be sent to a printer by following the 1-2-3
PrintGraph procedures.
3. EXAMPLE - Strange Data
A file called TEST.WKS contains five sets of data. The BSTAT
worksheet permits the data sets to be easily analyzed for their
basic statistical properties and compared visually in order to
determine possible inter-relationships. The following procedures
might be used to investigate the information.
Keystroke Comments
{Enter} Press the ENTER key to select the first
choice in the menu, i.e. Input.
200 {Enter} Specify maximum number of observations.
/fcc {ENTER} test {ENTER}
Use the 1-2-3 file/combine/copy/entire file
keystroke combination to combine the
information contained in the TEST.WKS file
into the data ranges in the worksheet.
Alt-M Bring up the main menu.
c Select the Calc option.
r Select the Results option to examine the
statistical properties of the ranges.
g Select the Graph option.
c or b Select Color or B&W(Monochrome) monitor
setting.
1 1Range option plots a graph of Range 1.
Looks like a series of random numbers.
press any key Return to graph menu.
2 2Range option plots a graph of Range 2. A
curve.
press any key Return to graph menu.
3 3Range option plots a graph of Range 3. A
sine wave.
press any key Return to graph menu.
4 4Range option plots a graph of Range 4.
Another curve.
09/09/84 BSTAT - 4
press any key Return to graph menu.
5 5Range option plots a graph of Range 5. A
strange pattern.
press any key Return to graph menu.
n Use NextMenu to select next menu.
b B13Range option plots a graph of Ranges 1 and
3.
press any key Return to graph menu.
nn Select graph menu beginning with A35Range.
a A35Range option plots a graph of Ranges 3 and
5.
press any key Return to graph menu.
nnnn Go to graph menu beginning with A1235Rge.
f F12345 option plots Ranges 1 through 5.
press any key Return to graph menu.
q Return to main menu.
q Exit to 1-2-3 READY mode.
{F5} c81 {ENTER} Use F5 function key (i.e. the 1-2-3 Go to
command) to go to cell c81.
/re{end}{right}{end}{down}{ENTER}
Erase the last 50 observations in each data
range in order to concentrate on the first 50
observations.
Alt-M Bring up the main menu.
c Select the Calc option.
g Select the Graph option.
c or b Select Color or B&W (Monochrome) monitor
setting.
nnn Select graph menu beginning with A35Range.
a A35Range option plots a graph of Ranges 3 and
5.
press any key Return to graph menu.
09/09/84 BSTAT - 5
nnnn Go to graph menu beginning with A1235Rge.
f F12345 option plots Ranges 1 through 5.
press any key Return to graph menu.
q Return to main menu.
09/09/84 BSTAT - 6
Menu Tree for BSTAT Worksheet
Input - Input Data
Blank - Clear Input Fields
. No - Cancel "Blank" Command
. Yes - Yes, Erase all input
Calc - Calculate Results
Results - Show Results
Graph - Plot Graph(s) of Data or Results
. Color - Print Graphs in Color (see PLOT1 Menu)
. B&W - Print Graphs in Monochrome (see PLOT1 Menu)
. Quit - Return to Menu
Print - Print Results
Agenda - Return to Worksheet Selection Agenda
. No - Cancel Request. Do not erase worksheet
. Yes - Erase Worksheet. Return to selection Agenda
Quit - Exit to 1-2-3 READY mode
PLOT1 Menu:
. 1Range - Plot Range 1
. 2Range - Plot Range 2
. 3Range - Plot Range 3
. 4Range - Plot Range 4
. 5Range - Plot Range 5
. 6Range - Plot Range 6
. NextMenu - Go to next plot menu (see PLOT2 Menu)
. Quit - Return to Menu
PLOT2 Menu:
. A12Range - Plot Ranges 1 and 2
. B13Range - Plot Ranges 1 and 3
. C14Range - Plot Ranges 1 and 4
. D15Range - Plot Ranges 1 and 5
. E16Range - Plot Ranges 1 and 6
. NextMenu - Go to next plot menu (see PLOT3 Menu)
. PrevMenu - Return to previous menu (see PLOT1 Menu)
. Quit - Return to Menu
PLOT3 Menu:
. A23Range - Plot Ranges 2 and 3
. B24Range - Plot Ranges 2 and 4
. C25Range - Plot Ranges 2 and 5
. D26Range - Plot Ranges 2 and 6
. E34Range - Plot Ranges 3 and 4
. NextMenu - Go to next plot menu (see PLOT4 Menu)
. PrevMenu - Return to previous menu (see PLOT2 Menu)
. Quit - Return to Menu
09/09/84 BSTAT - 7
PLOT4 Menu:
. A35Range - Plot Ranges 3 and 5
. B36Range - Plot Ranges 3 and 6
. C45Range - Plot Ranges 4 and 5
. D46Range - Plot Ranges 4 and 6
. E56Range - Plot Ranges 5 and 6
. NextMenu - Go to next plot menu (see PLOT5 Menu)
. PrevMenu - Return to previous menu (see PLOT3 Menu)
. Quit - Return to Menu
PLOT5 Menu:
. A123Rge - Plot Ranges 1, 2, and 3
. B124Rge - Plot Ranges 1, 2, and 4
. C125Rge - Plot Ranges 1, 2, and 5
. D126Rge - Plot Ranges 1, 2, and 6
. E134Rge - Plot Ranges 1, 3, and 4
. NextMenu - Go to next plot menu (see PLOT6 Menu)
. PrevMenu - Return to previous menu (see PLOT4 Menu)
. Quit - Return to Menu
PLOT6 Menu:
. A135Rge - Plot Ranges 1, 3, and 5
. B136Rge - Plot Ranges 1, 3, and 6
. C145Rge - Plot Ranges 1, 4, and 5
. D146Rge - Plot Ranges 1, 4, and 6
. E234Rge - Plot Ranges 2, 3, and 4
. NextMenu - Go to next plot menu (see PLOT7 Menu)
. PrevMenu - Return to previous menu (see PLOT5 Menu)
. Quit - Return to Menu
PLOT7 Menu:
. A235Rge - Plot Ranges 2, 3, and 5
. B236Rge - Plot Ranges 2, 3, and 6
. C345Rge - Plot Ranges 3, 4, and 5
. D346Rge - Plot Ranges 3, 4, and 6
. E456Rge - Plot Ranges 4, 5, and 6
. F1234Rge - Plot Ranges 1, 2, 3, and 4
. NextMenu - Go to next plot menu (see PLOT8 Menu)
. Quit - Return to Menu
PLOT8 Menu:
. A1235Rge - Plot Ranges 1, 2, 3, and 5
. B1236Rge - Plot Ranges 1, 2, 3, and 6
. C1345Rge - Plot Ranges 1, 3, 4, and 5
. D1346Rge - Plot Ranges 1, 3, 4, and 6
. E1456Rge - Plot Ranges 1, 4, 5, and 6
. F12345Rge - Plot Ranges 1, 2, 3, 4, and 5
. G123456Rg - Plot Ranges 1, 2, 3, 4, 5, and 6
. Quit - Return to Menu
09/09/84 BSTAT - 8
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```
DEPREC - Depreciation Schedules
1. INTRODUCTION
Depreciation is a non-cash item deducted from income before
taxes are calculated. It is intended to allocate the cost of
capital equipment over its useful life. A number of methods can
be used to calculate the amount to be allocated, and you should
seek qualified advice to choose the appropriate method. This
worksheet calculates depreciation by five methods:
- straight line: the depreciation amount is the same in
every year (except possibly the first and last).
- sum of years' digits: each year in the life is assigned a
number from N to 1 (i.e. in reverse order). The
depreciation in each year is proportional to the number
assigned to that year.
- declining balance: the depreciation in each year is a
fixed percentage of the opening book value for the year.
- declining balance with crossover: this method is similar
to declining balance, except that when the depreciation
falls below what would be allowed by the straight line
method over the remainder of the life, the (higher)
straight line depreciation is used. This method
depreciates the book value to the salvage value over the
life of the asset; the declining balance method may not
depreciate it so much.
- accelerated cost recovery system: the Economic Recovery
Tax Act of 1981 introduced new rules for depreciation.
Assets are assigned to one of five categories, and the
depreciation percentages are laid out for each category.
This worksheet is very simple to use. Just enter the cost
and other data shown in the input menu, and request a calculation.
You can examine the results of the calculation on your screen in
tabular or graphic form, or send them to your printer. Three
forms of graph are available for each schedule: a line graph, a
side-by-side bar chart, and a stacked bar chart.
2. USING DEPREC
The main menu of the DEPREC worksheet offers you seven
choices (plus Quit). They are as follows:
Input
This choice allows you to enter the input data needed for
the depreciation calculations. It leads to a sub-menu of
all the input data items. To enter or change an item,
select it from this menu, type the value, and press the
09/09/84 DEPREC - 1
ENTER key. Input is described in more detail below.
Blank
Choose this option if you want to clear the input area and
all calculated results. You will be asked to confirm your
intention to delete all the data.
Calc
When you have entered your data, select this option to
perform the calculations. It will set up all five
depreciation schedules then return you to the main menu.
Results
This option displays the depreciation schedules on your
screen. It leads to a sub-menu from which you can select
the schedule you want to display. If the life of the asset
is more than 15 years, you will get a scroll menu along with
the schedule so you can scroll the display up and down the
schedule.
Graph
You can produce three graphs from each schedule. The first
is a line graph showing the annual depreciation and closing
book value for each year, and accumulated depreciation. The
second is a side-by-side barchart showing the same
information as the line graph. The third is a 'stacked bar'
chart. In this chart, the lower section of each bar
represents the closing book value; the middle section
represents the depreciation for this year, and the top
section represents the prior accumulated depreciation (thus
the top two sections taken together represent the
accumulated depreciation). The Graph option is described in
more detail below.
Print
You can print any of the depreciation schedules, and the
input data area. The Print option is described in more
detail below.
Agenda
If you select this option (and confirm it when requested),
the current worksheet is lost and replaced by the main
agenda. Then you can load another worksheet from the disk.
Note confirmation is required before this option proceeds,
because it will overwrite the current worksheet.
2.1 Input Details
The input menu allows you to enter or change any input value.
The menu offers seven choices (plus Quit). To enter or change a
particular value, select it from the menu, type the (new) value,
and press the ENTER key. The value you enter will be checked for
reasonableness. If the value is not reasonable (eg. asset cost is
zero or less), 1-2-3 will beep at you, and you must enter a new
(reasonable) value before you can return to the input menu. The
items you can enter are as follows:
09/09/84 DEPREC - 2
Cost
allows you to enter the original cost of the asset. This
may be any value that is greater than the sum of the salvage
value and the grants. Note that if you are replacing data
that is already present, and you want to enter a
substantially lower value for the cost, the system may
object because it is lower than the sum of the previous
values for grants and salvage value which have not been
replaced. The simplest solution here is either to blank out
the previous input using the Blank option in the main menu,
or else to enter the salvage value and grants before the new
asset cost.
Grants
allows you to enter the amount of any grants or similar
credits which you might receive as a result of purchasing
this asset. Obviously, you can only depreciate an amount
net of these grants (which the worksheet calculates for
you). Grants must be zero or greater, but not greater than
the difference between the asset cost and the salvage value.
If you are entering data on top of existing data, and the
new cost is substantially greater than the old one, you
should enter it first. Otherwise the worksheet may object
to the value for grants because it is greater than the
difference between the (old) asset cost and salvage value.
Salvage
allows you to enter the salvage value of the asset at the
end of its useful life. The value you enter must be zero or
positive, but less than the asset cost minus grants. If you
are typing new data on top of existing data, and the new
asset cost is substantially higher than the previous one,
you should enter the cost first. Otherwise, the worksheet
might object when you try to enter the salvage value because
it is higher than the difference between the (old) cost and
grants.
PurDate
allows you to enter the purchase date of the asset. The
purchase data is split into two parts (distinguished by a
sub-menu) - the year and the month. To enter the year of
purchase, you must type (initial letters only) PurDate Year
followed by the year (four digits). To enter the month of
purchase, you must type (initial letters only) PurDate Month
followed by the month (January=1, February=2, etc.). The
purchase year is used only to annotate the schedules. The
purchase month affects the amount of depreciation taken in
the first year, and the amount that rolls over into the last
year of the schedule. (Unless the purchase month is 1, the
schedule will cover one more year than the life of the asset
to accommodate this roll-over.) For example, if the purchase
month is July (7), then only half the normal depreciation
will be taken in the first year, and the following years'
depreciations will be adjusted to compensate. If you can
take the full depreciation in the first year, you should
09/09/84 DEPREC - 3
enter 1 for the purchase month, regardless of when the asset
is purchased. The above comments do not apply to items in
ACRS Recovery Cost Categories 1 through 4, which are
unaffected by the month of purchase. For ACRS Recovery Cost
Category 5, a different schedule of percentages applies to
each month of purchase.
Life
allows you to enter the useful life (in years) of the asset.
This determines the period of time over which the asset will
be depreciated.
DBRate
allows you to enter the percentage of the opening book value
that may be deducted each year. The amount that may be
deducted each year decreases as the prior years' deductions
reduce the book value. You must enter a number between zero
and 100 (inclusive).
ACRSCat
allows you to enter the Recovery-Life Category, as defined
by the Economic Recovery Tax Act of 1981. The Categories
are as follows:
1 - 3-year property, for example automobiles, light trucks,
and equipment used in research and development.
2 - 5-year property, including most machinery and equipment
not falling into category 1.
3 - 10-year property, which covers certain types of public
utility property and real estate.
4 - 15-year utility property, including public utility
property, and some kinds of real estate such as
low-rental units.
5 - 15-year real property, which covers all other real
estate.
You must enter one of the above category numbers, or 1-2-3
will beep at you.
2.2 Graph Details
The graph menu offers you seven choices (plus Quit). Five
correspond to the five schedules you can display. The other two
allow you to choose the type of plot (line, bar, or stacked-bar),
and to set options (color or monochrome plots). The information
shown for each schedule is the same - annual and cumulative
depreciation, and closing book value. A slight exception occurs
in the stacked bar chart, where it makes more sense to show the
prior accumulated depreciation above the current year's
depreciation, so the sum of these two is the accumulated
depreciation (which, when added to the closing book value, always
gives the original cost, net of grants).
09/09/84 DEPREC - 4
The options in the graph menu are as follows:
Type
allows you to specify which form of graph you want. The
three choices in the sub-menu are Line, Bar, and Stacked
Bar. The line graph shows annual and accumulated
depreciation, and closing book value in three separate
lines. The bar graph shows the same three items as three
vertical bars side-by-side. The stacked-bar graph shows
only one vertical bar for each year. The bar is divided
into three slices. The lowest slice represents the closing
book value for the year, the centre slice represents the
depreciation for the year, and the top slice shows the
accumulated depreciation for prior years.
Options
allows you to specify Color or Black-and-white (ie.
monochrome) graphs, and to View the latest graph without
respecifying it. You might use this last option if you have
reset some of the graph options without changing data, and
want to see their effect.
Stline
plots the straight line depreciation schedule.
YrDig
plots the sum-of-years' digits depreciation schedule.
Dbal
plots the declining balance depreciation schedule.
Xover
plots the declining balance depreciation schedule with
crossover to straight line.
ACRS
plots the Accelerated Cost Recovery System depreciation
schedule.
2.3 Print Details
When you choose Print from the main menu, the macro pauses so
you can re-align the paper. Once you have done so, it remembers
where the top of the page is so that it can skip to the top of a
new page when you select the Page option from the print menu. The
worksheet does not automatically skip to a new page after each
schedule. If you want to print schedules on separate pages,
simply use the Page option to force a skip to a new page after
you've printed each one. If you omit the Page option, you can
print several schedules per page.
The print sub-menu offers seven choices (plus Quit). The
choices are as follows:
09/09/84 DEPREC - 5
Input
prints the input data area of the worksheet.
Stline
prints the straight line depreciation schedule.
YrsDig
prints the sum-of-years'-digits depreciation schedule.
Dbal
prints the declining balance depreciation schedule.
Xover
prints the declining balance depreciation schedule with
crossover to straight line depreciation.
ACRS
prints the Accelerated Cost Recovery System depreciation
schedule.
Page
forces a skip to the top of a new page.
3. EXAMPLE - Buying a Truck
In July 1984, you buy a light truck for your business. The
truck costs you $10,000, but you get a $500 tax credit. You
expect the truck to last three years, at which point its salvage
value should be $2,000. You want to consider a declining balance
rate of 40%, and the truck is classified in ACRS cost recovery
category 1.
When the DEPREC worksheet is loaded, you may enter the data
as follows:
Keystrokes Comments
{ENTER} Press the ENTER key to select the first
choice in the main menu - Input.
c 10000 {ENTER} Asset cost.
g 500 {ENTER} Grants to be netted against the asset cost.
s 2000 {ENTER} Salvage value.
py 1984 {ENTER} Year of purchase.
pm 7 {ENTER} Month of purchase.
l 3 {ENTER} Asset life (in years).
d 40 {ENTER} Declining balance rate.
09/09/84 DEPREC - 6
a 1 {ENTER} ACRS cost-recovery category.
q Return to the main menu.
c Calculate. There will be a delay while all
the schedules are calculated.
You can now display the schedules on your screen by choosing
the Results option from the main menu. Here's how:
r Select the Results option.
i Displays the input (home) screen. This
option typically has no effect, because you
are already on the home screen.
s Straight line depreciation schedule.
y Sum-of-years'-digits depreciation schedule.
d Declining balance depreciation schedule.
x Declining balance depreciation schedule with
crossover to the straight line method.
a Accelerated Cost Recovery System depreciation
schedule.
If the asset life is more than 15 years, the display of a
schedule is accompanied by a scroll menu that allows you to scroll
up and down the schedule one screen-full at a time.
The next option on the main menu is Graph. The graph menu
offers seven choices (plus Quit). You can display any one of
three types of graph for each of the five schedules. For example,
if you want to display a stacked bar graph of the ACRS
depreciation, you would proceed as follows (from the main menu):
g Select the Graph option.
ts Select a stacked bar graph.
a Display this graph for the ACRS schedule.
(Press any key when you've finished viewing
the graph.)
q Return to the main menu.
To print the depreciation schedules, select Print from the
main menu. For example, to print the input data and ACRS
depreciation schedule on one page, and the straight line and
declining balance depreciation schedules on a second page, proceed
as follows:
09/09/84 DEPREC - 7
p Select Print from the main menu. The system
will prompt you to align the paper in your
printer to the top of a new page.
{ENTER} Press the ENTER key when you have aligned the
paper. This tells the system where the top
of the page is so it can skip to the top of
the next page if you select Page from the
print menu.
ia Print the input data and ACRS depreciation
schedule on one page.
psd Skip to a new page, and print the straight
line and declining balance depreciation
schedules.
q Return to the main menu.
09/09/84 DEPREC - 8
Menu Tree for DEPREC Worksheet
Input - Input all data.
. Cost - Input the asset cost.
. Grants - Input grants to be netted against the cost.
. Salvage - Input the salvage value at the end of the life.
. PurDate - Input the purchase date.
. . Year - Input the year of purchase.
. . Month - Input the month of purchase (January=1, etc.).
. Life - Input the useful life of the asset (in years).
. DBRate - Input the declining balance depreciation rate (%).
. ACRSCat - Input the ACRS recovery-life category (1-5).
. Quit - Return to main menu.
Blank - Blank out all input and depreciation schedules.
. No - Do not blank out; return to main menu.
. Yes - Blank out data, then return to main menu.
Calc - Calculate all depreciation schedules.
Results - Display depreciation schedules on the screen.
. Stline - Display straight line depreciation schedule.
. YrsDig - Display sum-of-years-digits depreciation schedule.
. Dbal - Display declining balance depreciation schedule.
. Xover - Display crossover depreciation schedule.
. ACRS - Display ACRS depreciation schedule.
. Quit - Return to main menu.
Graph - Display graphs of depreciation schedules.
. Type - Set graph type.
. . Line - Prepare to display line graphs.
. . Bar - Prepare to display bar graphs.
. . Stacked-Bar - Prepare to display stacked bar graphs.
. Options - Set graph options.
. . Color - Display graphs in color.
. . B&W - Display graphs in monochrome.
. . View - Re-display the last-seen graph.
. Stline - Graph straight line depreciation schedule.
. YrsDig - Graph sum-of-years-digits depreciation schedule.
. Dbal - Graph declining balance depreciation schedule.
. Xover - Graph crossover depreciation schedule.
. ACRS - Graph ACRS depreciation schedule.
. Quit - Return to main menu.
Print - Print input data and depreciation schedules.
. Input - Print input data.
. Stline - Print straight line depreciation schedule.
. YrsDig - Print sum-of-years-digits depreciation schedule.
. Dbal - Print declining balance depreciation schedule.
. Xover - Print crossover depreciation schedule.
. ACRS - Print ACRS depreciation schedule.
. Page - Skip to the top of the next page.
. Quit - Return to main menu.
Agenda - Return to worksheet agenda.
. No - Do not leave this worksheet; return to main menu.
09/09/84 DEPREC - 9
. Yes - Clear this worksheet and load agenda.
Quit - Exit to 1-2-3 READY mode.
09/09/84 DEPREC - 10
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POWER WORKSHEETS FOR 1-2-3
INTRODUCTION
Congratulations! We think you have made a wise choice in
buying Lotus 1-2-3. With it, your only obstacles to solving a
problem are to supply the data and define the worksheet formulas
to analyze it. While we cannot help you supply the data, we can
help with the worksheet by giving you, in this package, six
predefined worksheets to perform common analyses.
Within a few minutes of starting, you should be able to begin
entering your data and getting results. We have designed our
worksheets to be easy to use. And we have included the options we
feel you will find most useful. For example, the worksheets
contain graph definitions so you can plot your data and/or the
results of the analysis. Also we use menus, like the ones in
Lotus 1-2-3 itself, so you are never left without guidance.
Before you use these worksheets, we strongly recommend that
you make a copy of the master diskette, and that you work only
with copies, never with the master itself. There are many mishaps
that can destroy the information on a diskette, ranging from
accidental erasure to coffee spills. The safest place for your
master diskette is on a shelf, not in the machine or on your desk.
To make it easy for you to copy the diskette, there is no copy
protection on it. You can copy it as often as you like using the
standard DOS utilities.
USING THE WORKSHEETS
The worksheets in this package have been designed to help you
analyze data with the minimum of effort. They will work on any
IBM PC or compatible machine that can support 1-2-3. To guide you
on your way, each worksheet is driven by a series of menus that
prompt you with the alternatives. In addition to calculating and
displaying the results, the worksheets include options to send
them to a printer, and to produce graphs.
While most of your work with this package requires no more
than regular typing and cursor movement, we occasionally have to
use off-beat key combinations. There are only two such key
combinations we will need. One is Ctrl-Break. To generate this
combination, hold down the key marked Ctrl, and press the key
marked Scroll Lock (it has Break printed on the front). This
forces an interruption of a macro (or of other processing). You
may find you need to press the key marked Esc to get back to READY
mode in 1-2-3. The other combination is Alt-x, where 'x' is a
letter. To generate this combination, hold down the key marked
Alt while typing the letter. This combination executes one of our
macros. There are several such macros in each worksheet. In
particular, the following macros have the same meaning in all
worksheets:
09/09/84 INTRO - 1
Alt-B begins execution of all the macros. Normally,
execution will begin automatically when each worksheet
is first loaded. However, you may occasionally find
you have accidentally 'broken out' of our macros (you
can tell this because the 'CMD' flag at the top right
corner of your screen will go out). To restart
execution from the very beginning, press Alt-B.
Alt-M executes the main menu. Use this to return to the
menus from 1-2-3 READY mode (ie. if the 'CMD' flag at
the top right corner of your screen goes out).
Typically, Alt-M has the same effect as Alt-B, but you
may find you need to use Alt-B to perform
initialization which Alt-M does not do.
Warning: If you use the 1-2-3 command /Move to move data into
a named range, the range name becomes invalid, along with any
formulas that refer to it. Most of our worksheets are protected
against such an event. However, the SREGR worksheet is not
protected. You should avoid the /Move command when using this
worksheet. This comment does not apply to /Copy.
When entering numbers, remember to omit any $ signs, or
punctuation, except for the decimal point. A leading hyphen must
be used if the number is negative, and a period should be used for
the decimal point if there are any non-zero digits to follow. If
the entry is a whole number, you need not enter the decimal point,
or any following zeros, even though decimal digits may appear in
the display. Percentages are entered the same way as other
numbers. Do not convert a percentage to a decimal, or use the %
key after typing the number. To enter 41.23 percent, simply type
41.23 and press the ENTER key.
THE AGENDA WORKSHEET
The AGENDA worksheet is the centrepiece of this package.
When you first enter the package, and whenever you leave one of
the other worksheets through the Agenda option, this worksheet is
loaded. It allows you to select any other worksheet in the
package. To select a worksheet, simply type the initial letter of
its name, or move the cell pointer over its name and press the
Enter key.
09/09/84 INTRO - 2
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NPV - Net Present Value Calculator
1. INTRODUCTION
The net present value of a cash flow (at a given discount
rate) is found by discounting all values in the cash flow back to
the opening period ('now') and calculating their sum, taking into
account the sign of each value. It yields a 'current value' for
the cash flow, allowing for the time value of money (ie. $1 now
is worth more than $1 next year).
Net present value is a commonly-used method of evaluating
projects or investments, or of comparing two investments with
different cash flow characteristics. (Another measure is the rate
of return, usually calculated as the discount rate which reduces
the net present value of the cash flow to zero. See the ROR
worksheet for a discussion of rate of return.)
This worksheet will calculate the net present value of a cash
flow at a number of discount rates. You can produce a plot of the
cash flow and cumulative cash flow by period. And you can produce
a plot of the net present value against the discount rate. The
discount rate at which this latter graph crosses the X axis is the
internal rate of return of the cash flow (see the ROR worksheet).
2. USING NPV
2.1 Overview
The main menu of the NPV worksheet offers you seven options
(plus Quit). They are:
Input
This option allows you to enter cash flow values and
discount rates. It presents a sub-menu from which to select
the data you want to input.
Blank
This option blanks out the input and results areas of the
worksheet, after receiving confirmation this is what you
intend. It is useful for clearing out all data before
entering an entirely new cash flow.
Calc
The calc option performs all calculations. You must use
this option whenever you change data or enter new data.
Results
When you select this option, you are presented a sub menu
allowing you to choose between the cash flow and the net
present value areas. The only essential difference is in
the set of column headings the program freezes as you scroll
through the data.
09/09/84 NPV - 1
Graph
This worksheet offers two main graphs. You can plot the
cash flow and cumulative cash flow by period; and you can
plot the net present values against the discount rates.
Print
This option sends the cash flow and net present value data
to your printer, after a pause for paper alignment.
Agenda
If you select this option, and confirm it when requested,
the current worksheet is lost and replaced by the main
worksheet selection agenda. You can then load another
worksheet. Note confirmation is required before this option
proceeds, because it overwrites the worksheet in memory.
2.2 Input Details
Choosing the Input option from the main menu leads to a sub
menu with three options - Cashflow, Periods/Yr, and DiscRate.
Each option allows you to enter part of the data.
The Cashflow option allows you to enter cash flow values by
period. This option places the cell pointer at the top of the
cash flow column and moves it down one cell each time you press
the Enter key. Thus, if you want to enter the entire cash flow,
simply type each number in turn and press the Enter key after each
one. Please note the following:
- A value must be entered for each period covering the
entire duration of the project and starting at period
zero. If the cash flow value for a particular period is
zero, enter zero. Do not leave the cell blank.
- Period zero is now, period one is one period (year,
month, or whatever) hence.
- Cash outflows must be entered as negative numbers; cash
inflows must be entered as positive numbers.
If you don't want to enter the whole cash flow (for example,
if you want to adjust a cash flow you've already entered) you may
use the cursor movement keys to place the cell pointer on any
number you want to change, and re-type it in normal 1-2-3 fashion.
When you press the Enter key, the macro will move the cell pointer
down one row.
The macro which drives this process has no way of knowing
when you've finished entering or changing data. When you have
finished, you must break out of the macro and re-invoke the input
menu. To do this, hold down the Ctrl key and press the Break key.
The CTL flag at the top of the screen will go out, indicating
you've broken out of the macro. Then hold down the Alt key and
press I to invoke the input menu.
09/09/84 NPV - 2
The Periods/Yr option accepts the number of periods that
correspond to a year. If you have annual data, you must enter 1.
If you have monthly data, enter 12. This parameter is used to
convert the discount rates from the annual values you enter to
values applicable to periods. Thus, whatever the periods your
data represents, you always enter discount rates as annual values.
The third choice in the input menu is DiscRate. It allows
you to enter annual discount rates for which the worksheet is to
calculate the net present value. Enter the rates as percentages.
Do not use the % key or convert to a decimal (for example, to
enter 20%, type 20 and press the Enter key). It's a good idea to
include zero in the set of discount rates, because this gives the
straight sum of the cash flow values - a figure you can calculate
independently to check your data entry.
2.3 Graph Details
This worksheet can produce two different graphs on either the
color or monochrome display. Each graph can take the form of a
line graph, a bar chart, or a scatter graph (points without
connecting lines). These are selected by means of a menu with
four choices.
The Cashflow option displays a graph of the cash flow by
period. The form of the graph will be the same as the one that
was last displayed. The NPV option displays a graph of the net
present value against the discount rate. This shows you how the
net present value behaves as future values are discounted more or
less heavily. The discount rate (if any) at which the graph
crosses the X-axis represents the rate which reduces the net
present value of the cash flow to zero. This is known as the
internal rate of return of the cash flow.
The Type option presents a sub-menu from which you can select
the form of the graph. The three choices are Line, Bar, and
Scatter. Each choice will immediately re-display the last graph
in the selected form, then return to the graph menu.
The final choice - Options - allows you to choose the Color
or monochrome (B&W) monitor for the display. Again, each choice
re-displays the last graph on the selected device.
3. EXAMPLES
3.1 A Simple Investment
This example shows how the net present value varies with
discount rate when the cash flow is well-behaved. You have been
given the opportunity to purchase a note for $15,000. The note
will return $5,000 at the end of the first year, $7,000 at the end
of the second year, and $9,000 at the end of the third year. What
is the net present value of this investment at various discount
rates?
09/09/84 NPV - 3
Keystroke Comments
{ENTER} Select the Input option from the main menu.
P 1 {ENTER} Select the Periods/Yr option from the input menu,
and enter the number of periods per year (the data
is annual)
C Select the Cashflow option from the input menu.
The cell pointer will go to the top of the cash
flow column.
-15000 {ENTER} Enter the value for period zero (now). Since this
is a payment (ie. a cash outflow) its value is
entered as a negative number. When you press the
ENTER key, the cell pointer moves down to the next
cell in the column.
5000 {ENTER} Enter the value returned at the end of the first
year. This is a cash inflow.
7000 {ENTER} Enter the value returned at the end of the second
year.
9000 {ENTER} Enter the value returned at the end of the third
year.
{Ctrl}{Break} To terminate the input loop, hold down the Ctrl
key and press the Break key. The CMD flag at the
top of the screen will go out.
{Alt} I To re-invoke the input menu, hold down the Alt key
and press I.
D Select the DiscRate option to enter the discount
rates, as annual percentages. The cell pointer
will move to the top cell in the discount rate
column.
0 {ENTER} The net present value at zero percent is the sum
of the cash flow items. In this example, it's
easy to check your input by eye, but you may want
to get into the habit of always entering zero in
the discount rate column to give you a total cash
flow, which you could check independently.
5 {ENTER} Enter the remaining discount rates.
10 {ENTER}
15 {ENTER}
20 {ENTER}
25 {ENTER}
30 {ENTER}
{Ctrl}{Break} As for the cash flow column, hold down the Ctrl
key and press Break to terminate the input loop.
09/09/84 NPV - 4
{Alt} I Then hold down the Alt key and press I to re-
invoke the input menu.
Q Return to the main menu
C Select the Calc option in the main menu. The net
present values will be calculated
G Select the Graph option from the main menu.
text {ENTER} Whenever you enter the graph menu, the system will
ask you to enter a second title line for the
graphs. You may leave this line blank, or enter
any short description. To get rid of an existing
description before typing a new one, press the Esc
key.
N This option displays a graph of the net present
value against the discount rates. Press any key
to return to the graph menu.
T L If the graph is not already a line graph, you can
go to the Type sub-menu to specify a line graph.
The graph will be re-displayed. Press any key to
return to the graph menu.
The line graph shows that the net present value of the cash
flow is zero at a discount rate of about 17%. This is the
internal rate of return of the cash flow. You should buy the note
if this rate of return is sufficiently high, bearing in mind all
other factors (such as security).
3.2 An Accelerated Income Project
Many projects in the resources industry are aimed at
accelerating resource recoveries. This leads to increased cash
flows in early years, followed by compensating decreased cash
flows in later years. Thus the cash flow consists of a series of
outflows (the investment), followed by a series of inflows (the
increased cash flows) followed by another series of outflows (the
reduced cash flows). This is not a 'well-behaved' cash flow. The
NPV worksheet can illustrate how the net present value of such a
cash flow varies with discount rate.
You are considering the value of an enhanced recovery
project. The immediate cost of this project is $600. It will
increase cash flows in the next three years by $800, $500, and
$200 respectively. In the three years after that, however, cash
flows will be reduced by $200, $500, and $800 respectively. You
need to know the net present value of this project at various
rates of return.
09/09/84 NPV - 5
Keystroke Comments
{ENTER} Select the first option - Input - from the main
menu.
P 1 {ENTER} Enter the number of periods per year (the data is
annual).
C Select the Cashflow option from the input menu.
The cell pointer will go to the top cell of the
cash flow column.
-600 {ENTER} Enter the initial investment (in period zero).
The cell pointer will automatically move down to
the next period when you press the Enter key.
800 {ENTER} Enter the increases in cash flow values in the
500 {ENTER} first three years.
200 {ENTER}
-200 {ENTER} Enter the decreases in cash flow values in the
-500 {ENTER} next three years.
-800 {ENTER}
{Ctrl}{Break} When all the cash flow values have been entered,
hold down the Ctrl key and press the Break key to
break out of the macro.
Alt I To re-invoke the input menu, hold down the Alt key
and press I.
D Select the DiscRates option in the input menu to
enter discount rates. The cell pointer will go to
the top cell in the discount rates column.
0 {ENTER} Enter the discount rates, as annual percentages
5 {ENTER} Each time you press the Enter key, the cell
10 {ENTER} pointer will move down to the next cell in the
15 {ENTER} column.
20 {ENTER}
25 {ENTER}
30 {ENTER}
35 {ENTER}
40 {ENTER}
45 {ENTER}
50 {ENTER}
55 {ENTER}
60 {ENTER}
65 {ENTER}
70 {ENTER}
75 {ENTER}
80 {ENTER}
85 {ENTER}
90 {ENTER}
95 {ENTER}
100 {ENTER}
09/09/84 NPV - 6
{Ctrl}{Break} When you have entered all the discount rates, hold
down the Ctrl key and press the Break key to break
out of the input loop.
{Alt} I To re-invoke the input menu, hold down the Alt key
and type I.
Q Return to the main menu.
C Invoke the calculations.
G Select the graph option from the main menu.
text {ENTER} Each time you invoke the graph menu, it asks you
to enter the second title line for the graphs.
You may enter any short description. To remove an
existing description before typing a new one,
press the Esc key.
N Select the NPV option in the graph menu to display
a graph of the net present value against the
annual discount rates. Press any key to return to
the graph menu.
T L Specify the type of graph as a line graph. The
graph will immediately be re-displayed. Press any
key to return to the graph menu.
Q Return to the main menu
Q Exit to 1-2-3 READY mode. To return to the main
menu, hold down the Alt key and type M.
09/09/84 NPV - 7
Menu Tree for NPV Worksheet
Input - Input periods/year, cash flow, and discount rates
. Periods/Yr - Enter number of periods per year
. Cashflow - Enter cash flow values by period
. DiscRate - Enter annual discount rates (%)
. Quit - Return to main menu
Blank - Blank out all input areas
. No - Do not erase data. Return to main menu
. Yes - Erase all input data and results
Calc - Calculate Results
Results - Display Results
. Cashflow - Display cashflow figures and column headings
. . Down - Scroll down one screen
. . Up - Scroll up one screen
. . Quit - Return to results menu
. NPV - Display net present values and column headings
. . Down - Scroll down one screen
. . Up - Scroll up one screen
. . Quit - Return to results menu
. Quit - Return to main menu
Graph - Plot graphs of cashflow and/or results
. Cashflow - Display graph of cashflow and cumulative cashflow
. NPV - Display graph of net present values
. Type - Set type of graph
. . Line - Display a line graph
. . Bar - Display a bar chart
. . Scatter - Display a scatter chart
. Options - Set color or monochrome display option
. . Color - Display graph in color
. . B&W - Display graph in monochrome
. Quit - Return to main menu
Print - Print Results
Agenda - Return to Worksheet Selection Agenda
. No - Do not leave this worksheet. Return to main menu
. Yes - Leave this worksheet. Load the selection agenda
Quit - Exit to 1-2-3 READY mode
09/09/84 NPV - 8
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PROFIT - Profitability Analysis
1. INTRODUCTION
This worksheet helps you carry out a variety of analyses on
the profitability of selling goods or services. It takes into
account the revenue received for each sale, the cost of producing
the goods, and the fixed costs or overheads. As well as breakeven
point calculations, the worksheet will tell you what sales are
required to produce a given profit (before tax) or a given profit
margin (defined as the percentage of profit before tax to sales).
A wide selection of graphs are available to help you display
the relationships between the various factors. The relationship
may be plotted between any pair chosen from the following seven
items:
Unit cost of production
Revenue per unit sold
Fixed costs
Profit before tax
Margin before tax
Sales revenue
Number of units sold.
The worksheet can simultaneously handle data for up to four
cases, and data from any case can be selected for plotting.
2. USING PROFIT
2.1 Overview
The PROFIT worksheet is simple to use. There is one screen
where the basic data is input and the main results are displayed.
The main menu presents five options (plus Quit). They are:
Input
The input option places you in 1-2-3 Range Input mode so you
can enter the input data on the main screen. 1-2-3-
highlights the cells into which you can input data,and will
only move the cell pointer to input cells. When you have
finished inputting, press the Esc key to return to the main
menu.
Blank
The Blank option blanks out one entire case (ie. one column)
in the main screen. This is useful if you want to start
again from scratch in that case.
Graph
This option presents you with a series of menus where you
can specify what you want to see plotted. There is a
selection of seven items (given above), and you may plot any
item against any other item - a total of 42 different
08/21/84 PROFIT - 1
graphs. Graphing is described in more detail below.
Print
This option prints the main screen containing your input
data and results. It first asks you to align the paper in
your printer. Then it offers you the opportunity to define
one line of header text and one line of footer text.If you
want to eliminate an existing header or footer before typing
a new one, simply press the Esc key.
Agenda
If you select this option, and confirm it when requested,
the current worksheet is lost and replaced by the main
worksheet selection agenda. You can then load another
worksheet. Note confirmation is required before this option
proceeds, because it overwrites the worksheet in memory.
2.2 Graph Details
Graphics form the majority of this worksheet. While the
table of numbers presented on the main screen may be interesting,
graphs of the relationships between the various factors are even
more useful for showing the relationships between them. A wide
variety of graphs is available. They are designed to show the
sensitivity of one factor on another, where the factors are those
listed in the introduction.
When you first select the Graph option, and after each graph,
the worksheet presents a menu where you can select which case (ie.
column) you want to examine. Then you are presented with a pair
of similar menus allowing you to select the two factors whose
relationship is to be plotted. The first of the pair is the
factor to be plotted on the vertical axis of the graph. This is
called the dependent factor, because its values depend on the
values you specify for the other factor. The second menu of the
pair selects the factor to be varied. This is called the control
factor. The control factor is plotted along the horizontal axis
of the graph.
Once you have chosen the factors to be plotted, the worksheet
asks you to specify low and high limits of the range for the
control factor. Once this is done, the worksheet calculates and
displays the graph. When you have viewed the graph, press any key
to continue.
The worksheet will then present you with the option of saving
this graph on disk so you can print it using 1-2-3's PrintGraph
program. If you select No (the default), you will return
immediately to the first menu allowing you to select a case. If
you select Yes the worksheet will issue a /Graph Save command.
You must specify a file name for the graph (the filename extension
will be .PIC), and if a file with that name already exists, you
must indicate whether you want to replace it. When the graph has
been saved, the worksheet does not continue automatically. The
reason for this is that the macro has no way of knowing whether
you will enter a conflicting file name, and if you do, which way
08/21/84 PROFIT - 2
you will turn. Being unable to prepare itself for these options,
the macro retreats. You must hold down the Alt key and press M to
re-invoke the main menu.
As mentioned above, there are 42 different graphs that can be
produced from this worksheet. The following gives a brief
description of each one, and the formula it uses. Note that each
pair of factors is represented on two graphs (with the roles of
dependent and control factors reversed). Sometimes the two graphs
are equivalent, as in the Unit cost/Unit revenue case. For other
pairs, the two graphs are not equivalent because they assume
different unit sales. For example, the graph with Unit cost as
control factor and Margin before tax as dependent factor assumes
the unit sales required for the given margin from the main input
screen; The reverse graph assumes breakeven units.
Dependent Factor: Unit Cost
Control Factor: Unit Revenue
Graph Title: Unit Cost Required to Break Even
Description: This graph shows the unit cost that produces
a breakeven situation as unit revenue
changes. It assumes the fixed cost and
breakeven units shown on the main input
screen.
Formula Used:
Unit cost = Unit revenue - Fixed cost / Breakeven units
Dependent Factor: Unit Cost
Control Factor: Fixed Cost
Graph Title: Unit Cost Required to Break Even
Description: This graph shows the unit cost that produces
a breakeven situation as the fixed cost
changes. It assumes the unit revenue and
breakeven units shown on the main input
screen.
Formula Used:
Unit cost = Unit revenue - Fixed cost / Breakeven units
Dependent Factor: Unit Cost
Control Factor: Profit Before Tax
Graph Title: Unit Cost to Produce Given Profit
Description: This graph shows the unit cost that produces
the specified profit before tax. It assumes
the unit revenue, fixed cost, and the units
required for the given profit before tax on
the main input screen. If you want to use
the breakeven units instead of the units
required for the given PBT, set the profit
before tax on the main input screen to zero.
Formula Used:
Unit cost = Unit revenue - (Fixed cost + PBT) / PBT units
08/21/84 PROFIT - 3
Dependent Factor: Unit Cost
Control Factor: Margin Before Tax (%)
Graph Title: Unit Cost to Produce Given Margin
Description: This graph shows the unit cost that produces
the specified margin before tax. It assumes
the unit revenue, fixed cost, and the units
required for the given margin on the main
input screen. If you want to use the
breakeven units instead of the units required
for the given margin, set the margin on the
main input screen to zero.
Formula Used:
Unit cost = Unit revenue * (1 - 0.01 * Margin ) - Fixed cost /
Margin units
Dependent Factor: Unit Cost
Control Factor: Sales $
Graph Title: Unit Cost Required to Break Even
Description: This graph shows the unit cost that produces
a breakeven situation from the given sales.
It assumes the unit revenue and fixed cost
from the main input screen.
Formula Used:
Unit cost = Unit revenue * (Sales $ - Fixed cost) / Sales $
Dependent Factor: Unit Cost
Control Factor: Sales Units
Graph Title: Unit Cost Required to Break Even
Description: This graph shows the unit cost that produces
a breakeven situation from the given sales
units. It assumes the unit revenue and fixed
cost from the main input screen.
Formula Used:
Unit cost = Unit revenue - Fixed cost / Sales units
Dependent Factor: Unit Revenue
Control Factor: Unit Cost
Graph Title: Unit Revenue Required to Break Even
Description: This graph shows the unit revenue that
produces a breakeven situation as unit cost
changes. It assumes the fixed cost and
breakeven units shown on the main input
screen.
Formula Used:
Unit revenue = Unit cost + Fixed cost / Breakeven units
Dependent Factor: Unit Revenue
Control Factor: Fixed Cost
Graph Title: Unit Revenue Required to Break Even
Description: This graph shows the unit revenue that
produces a breakeven situation as the fixed
cost changes. It assumes the unit cost and
08/21/84 PROFIT - 4
breakeven units shown on the main input
screen.
Formula Used:
Unit revenue = Unit cost + Fixed cost / Breakeven units
Dependent Factor: Unit Revenue
Control Factor: Profit Before Tax
Graph Title: Unit Revenue to Produce Given Profit
Description: This graph shows the unit revenue that
produces the specified profit before tax. It
assumes the unit cost, fixed cost, and the
units required for the given profit before
tax on the main input screen. If you want to
use the breakeven units instead of the units
required for the given PBT, set the profit
before tax on the main input screen to zero.
Formula Used:
Unit revenue = Unit cost + (Fixed cost + PBT) / PBT units
Dependent Factor: Unit Revenue
Control Factor: Margin Before Tax
Graph Title: Unit Revenue to Produce Given Margin
Description: This graph shows the unit revenue that
produces the specified margin before tax. It
assumes the unit cost, fixed cost, and the
units required for the given margin on the
main input screen. If you want to use the
breakeven units instead of the units required
for the given margin, set the margin on the
main input screen to zero.
Formula Used:
Unit revenue = (Unit cost + Fixed cost / Margin units) / (1 - 0.01
* Margin)
Dependent Factor: Unit Revenue
Control Factor: Sales $
Graph Title: Unit Revenue Required to Break Even
Description: This graph shows the unit revenue that
produces a breakeven situation from the given
sales. It assumes the unit cost and fixed
cost from the main input screen.
Formula Used:
Unit revenue = Unit cost * Sales $ / (Sales $ - Fixed cost)
Dependent Factor: Unit Revenue
Control Factor: Sales Units
Graph Title: Unit Revenue Required to Break Even
Description: This graph shows the unit revenue that
produces a breakeven situation from the given
sales units. It assumes the unit cost and
fixed cost from the main input screen.
Formula Used:
08/21/84 PROFIT - 5
Unit revenue = Unit cost + Fixed cost / Sales units
Dependent Factor: Fixed Cost
Control Factor: Unit Cost
Graph Title: Fixed Costs Required to Break Even
Description: This graph shows the fixed cost that produces
a breakeven situation as unit cost changes.
It assumes the unit revenue and breakeven
units shown on the main input screen.
Formula Used:
Fixed cost = Breakeven units * (Unit revenue - Unit cost)
Dependent Factor: Fixed Cost
Control Factor: Unit Revenue
Graph Title: Fixed Costs Required to Break Even
Description: This graph shows the fixed cost that produces
a breakeven situation as unit revenue
changes. It assumes the unit cost and
breakeven units shown on the main input
screen.
Formula Used:
Fixed cost = Breakeven units * (Unit revenue - Unit cost)
Dependent Factor: Fixed Cost
Control Factor: Profit Before Tax
Graph Title: Fixed Costs to Produce Given Profit
Description: This graph shows the fixed cost that produces
a breakeven situation as profit before tax
changes. It assumes the unit revenue, unit
cost, and the units required for the given
profit before tax on the main input screen.
If you want to use the breakeven units
instead of the units required for the given
PBT, set the profit before tax on the main
input screen to zero.
Formula Used:
Fixed cost = PBT units * (Unit revenue - Unit cost) - PBT
Dependent Factor: Fixed Cost
Control Factor: Margin Before Tax
Graph Title: Fixed Cost to Produce Given Margin
Description: This graph shows the fixed cost that produces
a breakeven situation as margin before tax
changes. It assumes the unit revenue, unit
cost, and the units required for the given
margin before tax on the main input screen.
If you want to use the breakeven units
instead of the units required for the given
margin, set the margin before tax on the main
input screen to zero.
Formula Used:
Fixed cost = Margin units * (Unit revenue * (1 - 0.01 * Margin) -
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Unit cost)
Dependent Factor: Fixed Cost
Control Factor: Sales $
Graph Title: Fixed Costs Required to Break Even
Description: This graph shows the fixed cost that produces
a breakeven situation from the given sales.
It assumes the unit revenue and unit cost
from the main input screen.
Formula Used:
Fixed cost = Sales $ * (Unit revenue - Unit cost) / Unit revenue
Dependent Factor: Fixed Cost
Control Factor: Sales Units
Graph Title: Fixed Costs Required to Break Even
Description: This graph shows the fixed cost that produces
a breakeven situation from the given sales
units. It assumes the unit revenue and unit
cost from the main input screen.
Formula Used:
Fixed cost = Sales units * (Unit revenue - Unit cost)
Dependent Factor: Profit Before Tax
Control Factor: Unit Cost
Graph Title: Profit For Given Unit Cost
Description: This graph shows the profit before tax that
results from a given unit cost. It assumes
the unit revenue, fixed cost, and the
breakeven units from the main input screen.
Formula Used:
PBT = Breakeven units * (Unit revenue - Unit cost) - Fixed cost
Dependent Factor: Profit Before Tax
Control Factor: Unit Revenue
Graph Title: Profit For Given Unit Revenue
Description: This graph shows the profit before tax that
results from a given unit revenue. It
assumes the unit cost, fixed cost, and the
breakeven units from the main input screen.
Formula Used:
PBT = Breakeven units * (Unit revenue - Unit cost) - Fixed cost
Dependent Factor: Profit Before Tax
Control Factor: Fixed Cost
Graph Title: Profit For Given Fixed Costs
Description: This graph shows the profit before tax that
results from a given fixed cost. It assumes
the unit revenue, unit cost, and the
breakeven units from the main input screen.
Formula Used:
PBT = Breakeven units * (Unit revenue - Unit cost) - Fixed cost
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Dependent Factor: Profit Before Tax
Control Factor: Margin Before Tax
Graph Title: Profit Required for Given Margin
Description: This graph shows the profit before tax that
results in the given margin %. It assumes
the unit revenue, and the units required for
the given margin before tax on the main input
screen. If you want to use the breakeven
units instead of the units required for the
given margin, set the margin before tax on
the main input screen to zero.
Formula Used:
PBT = Margin units * Unit revenue * Margin % / 100
Dependent Factor: Profit Before Tax
Control Factor: Sales $
Graph Title: Profit for Given Sales $
Description: This graph shows the profit before tax that
results from the given sales $. It assumes
the unit revenue, unit cost, and fixed cost
from the main input screen.
Formula Used:
PBT = Sales $ * (Unit revenue - Unit cost) / Unit revenue -
Fixed cost
Dependent Factor: Profit Before Tax
Control Factor: Sales Units
Graph Title: Profit for Given Sales Units
Description: This graph shows the profit before tax that
results from the given sales units. It
assumes the unit revenue, unit cost, and
fixed cost from the main input screen.
Formula Used:
PBT = Sales units * (Unit revenue - Unit cost) - Fixed cost
Dependent Factor: Margin Before Tax
Control Factor: Unit Cost
Graph Title: Margin for Given Unit Cost
Description: This graph shows the margin before tax that
results from a given unit cost. It assumes
the unit revenue, fixed cost, and the
breakeven units from the main input screen.
Formula Used:
Margin = 100 * (1 - Unit cost / Unit revenue - Fixed cost /
(Breakeven units * Unit revenue))
Dependent Factor: Margin Before Tax
Control Factor: Unit Revenue
Graph Title: Margin for Given Unit Revenue
Description: This graph shows the margin before tax that
08/21/84 PROFIT - 8
results from a given unit revenue. It
assumes the unit cost, fixed cost, and the
breakeven units from the main input screen.
Formula Used:
Margin = 100 * (1 - Unit cost / Unit revenue - Fixed cost /
(Breakeven units * Unit revenue))
Dependent Factor: Margin Before Tax
Control Factor: Fixed Cost
Graph Title: Margin for Given Fixed Cost
Description: This graph shows the margin before tax that
results from a given fixed cost. It assumes
the unit revenue, unit cost, and the
breakeven units from the main input screen.
Formula Used:
Margin = 100 * (1 - Unit cost / Unit revenue - Fixed cost /
(Breakeven units * Unit revenue))
Dependent Factor: Margin Before Tax
Control Factor: Profit Before Tax
Graph Title: Margin for Given Profit
Description: This graph shows the margin before tax that
results from a given profit before tax. It
assumes the unit revenue and the units
required for the given profit before tax on
the main input screen. If you want to use
the breakeven units instead of the units
required for the given PBT, set the profit
before tax on the main input screen to zero.
Formula Used:
Margin = 100 * PBT / (PBT units * Unit revenue)
Dependent Factor: Margin Before Tax
Control Factor: Sales $
Graph Title: Margin for Given Sales $
Description: This graph shows the margin before tax that
results from a given sales $. It assumes the
unit revenue, unit cost, and the fixed cost
from the main input screen.
Formula Used:
Margin = 100 * (Unit revenue - Unit cost) / Unit revenue -
Fixed cost / Sales $
Dependent Factor: Margin Before Tax
Control Factor: Sales Units
Graph Title: Margin for Given Sales Units
Description: This graph shows the margin before tax that
results from a given sales units. It assumes
the unit revenue, unit cost, and the fixed
cost from the main input screen.
Formula Used:
Margin = 100 * (1 - Unit cost / Unit revenue - Fixed cost /
08/21/84 PROFIT - 9
Sales units / Unit revenue)
Dependent Factor: Sales $
Control Factor: Unit Cost
Graph Title: Sales Required to Break Even
Description: This graph shows the sales $ required to
break even as the unit cost varies. It
assumes the fixed cost and unit revenue from
the main input screen.
Formula Used:
Sales $ = Fixed cost * Unit revenue / (Unit revenue - Unit cost)
Dependent Factor: Sales $
Control Factor: Unit Revenue
Graph Title: Sales Required to Break Even
Description: This graph shows the sales $ required to
break even as the unit revenue varies. It
assumes the fixed cost and unit cost from the
main input screen.
Formula Used:
Sales $ = Fixed cost * Unit revenue / (Unit revenue - Unit cost)
Dependent Factor: Sales $
Control Factor: Fixed Cost
Graph Title: Sales Required to Break Even
Description: This graph shows the sales $ required to
break even as the fixed cost varies. It
assumes the unit revenue and unit cost from
the main input screen.
Formula Used:
Sales $ = Fixed cost * Unit revenue / (Unit revenue - Unit cost)
Dependent Factor: Sales $
Control Factor: Profit Before Tax
Graph Title: Sales Required for Given Profit
Description: This graph shows the sales $ required to
produce a given profit before tax. It
assumes the unit revenue, unit cost, and
fixed cost from the main input screen.
Formula Used:
Sales $ = (PBT + Fixed cost) * Unit revenue /
(Unit revenue - Unit cost)
Dependent Factor: Sales $
Control Factor: Margin Before Tax
Graph Title: Sales Required for Given Margin
Description: This graph shows the sales $ required to
produce a given margin before tax. It
assumes the unit revenue, unit cost, and
fixed cost from the main input screen.
Formula Used:
08/21/84 PROFIT - 10
Sales $ = Fixed cost / (1 - Unit cost / Unit revenue - 0.01 *
Margin)
Dependent Factor: Sales $
Control Factor: Sales Units
Graph Title: Sales $ Versus Sales Units
Description: This graph shows the relationship between
sales $ and sales units. It assumes the unit
revenue from the main input screen.
Formula Used:
Sales $ = Sales units * Unit revenue
Dependent Factor: Sales Units
Control Factor: Unit Cost
Graph Title: Unit Sales Required to Break Even
Description: This graph shows the unit sales that will
result in a breakeven situation as the unit
cost varies. It assumes the fixed cost and
the unit revenue from the main input screen.
Formula Used:
Sales Units = Fixed cost / (Unit revenue - Unit cost)
Dependent Factor: Sales Units
Control Factor: Unit Revenue
Graph Title: Unit Sales Required to Break Even
Description: This graph shows the unit sales that will
result in a breakeven situation as the unit
revenue varies. It assumes the fixed cost
and the unit cost from the main input screen.
Formula Used:
Sales Units = Fixed cost / (Unit revenue - Unit cost)
Dependent Factor: Sales Units
Control Factor: Fixed Cost
Graph Title: Unit Sales Required to Break Even
Description: This graph shows the unit sales that will
result in a breakeven situation as the fixed
cost varies. It assumes the unit revenue and
the fixed cost from the main input screen.
Formula Used:
Sales Units = Fixed cost / (Unit revenue - Unit cost)
Dependent Factor: Sales Units
Control Factor: Profit Before Tax
Graph Title: Unit Sales for Given Profit
Description: This graph shows the unit sales that are
required to produce a given profit before
tax. It assumes the unit revenue, unit cost,
and the fixed cost from the main input
screen.
Formula Used:
08/21/84 PROFIT - 11
Sales Units = (Fixed cost + PBT) / (Unit revenue - Unit cost)
Dependent Factor: Sales Units
Control Factor: Margin Before Tax
Graph Title: Unit Sales for Given Margin
Description: This graph shows the unit sales that are
required to produce a given margin before
tax. It assumes the unit revenue, unit cost,
and the fixed cost from the main input
screen.
Formula Used:
Sales units = Fixed cost / (Unit revenue * (1 - 0.01 * Margin) -
Unit cost)
Dependent Factor: Sales Units
Control Factor: Sales $
Graph Title: Sales $ Versus Sales Units
Description: This graph shows the relationship between
sales $ and sales units. It assumes the unit
revenue from the main input screen.
Formula Used:
Sales units = Sales $ / Unit revenue
3. EXAMPLE
Your company is considering making and selling widgets.
Research indicates that you can produce a widget for about $2, and
sell it for about $5. Annual overheads are estimated at $10,000.
Your V.P. Finance has asked you to analyze these figures, and
answer the following specific questions:
1. What is the breakeven volume?
2. If your company is to make $5,000 per year profit from
this venture, what sales (in $ and units) are required?
3. Your company aims for a 25% margin on sales, before
tax. What sales (in $ and units) are required to
achieve this?
4. What are the breakeven volumes if unit cost is $1.50 or
$3.00, and unit revenue is $4.00 or $6.00?
5. Repeat the above with annual overheads of $15,000.
You know that the V.P. likes to see graphs of sensitivity
analyses, so you decide to attack questions 4 and 5 graphically.
The following are the keystrokes required to produce answers to
the questions posed, once you've loaded the worksheet:
Keystrokes Comments
{ENTER} Select the Input option from the main menu
2 {DOWN} Enter the unit cost for case A
5 {DOWN} Enter unit revenue
10000 {DOWN} Enter fixed cost
5000 {DOWN} Enter required profit before tax
08/21/84 PROFIT - 12
25 {DOWN} Enter required margin before tax
2 (DOWN} Enter corresponding data for case B
5 {DOWN}
15000 {DOWN}
5000 {DOWN}
25 {ENTER}
{Esc} Return to main menu.
At this point, the screen shows the results of the basic
calculations. They are as follows:
Case A Case B
Fixed Cost $10,000 $15,000
Breakeven Units 3,333 5,000
Units for $5,000 PBT 5,000 6,666
$ sales for $5,000 PBT $25,000 $33,333
Units for 25% margin 5,714 8,571
$ sales for 25% margin $28,571 $42,857
You can now proceed to the graphical analysis for questions 4
and 5. The keystrokes are as follows:
Keystrokes Comments
{Alt} M If required, to invoke the main menu.
G Select the Graph option from the main menu
{ENTER} Select case A
U Plot unit sales on the vertical axis
(dependent factor)
C Plot unit cost on the horizontal axis (control
factor).
1.5 {ENTER} Specify the low limit for the control factor
(unit cost). Note that the graph scale will
actually begin at 1.4, not 1.5. The reason is
that the macro decides upon 0.2 as a
convenient scale increment, and both the low
and high limits of the graph are multiples of
the chosen increment.
3 {ENTER} Specify high limit for unit cost.
At this point, there is a pause while the
macro calculates and displays the graph. It
shows that breakeven units fall to around
2,850 if the unit cost falls to $1.50. If the
unit cost is as high as $3.00, the breakeven
units are 5,000. Of course, with unit cost =
08/21/84 PROFIT - 13
$2.00, the breakeven units are 3,333, as we
saw on the main screen.
{ENTER} To return to the menus when you've finished
examining the graph.
Y To save this graph on disk, so you can get a
printed copy.
bevola1 {ENTER} Select a filename for the graph.
{Alt} M Re-invoke the main menu after the graph has
been saved.
G Select graph option.
A Case A.
U Plot unit sales ...
R against unit revenue.
4 {ENTER} Low limit for unit revenue.
6 {ENTER} High limit for unit revenue.
The graph that is displayed shows
breakeven units = 4,000 when unit revenue =
$4.00, falling to 2,500 when unit revenue =
$6.00.
{ENTER} return to menu when finished with graph.
Y Save this graph on disk for future printing.
bevola2 {ENTER} Name of graph save file.
{Alt} M Re-invoke menu when graph has been saved.
G B U C Select graphs; plot breakeven units versus
unit cost for case B.
1.5 {ENTER} Low limit for unit cost.
3 {ENTER} High limit for unit cost.
The graph shows breakeven units = 4,300
when unit cost = $1.50, and breakeven units =
7,500 when unit cost = $3.00.
{ENTER} When finished viewing graph.
Y bevolb1 {ENTER} Save graph on disk.
{Alt} M Re-invoke menu.
G B U R Graph breakeven units against unit revenue for
08/21/84 PROFIT - 14
case B.
4 {ENTER} Low limit for unit revenue.
6 {ENTER} High limit for unit revenue.
The graph shows breakeven units = $7,500
when unit revenue is $4.00, and breakeven
units = 3,800 when unit revenue is $6.00.
{ENTER} When finished viewing graph.
Y bevolb2 {ENTER} Save graph on disk.
Q To leave the Graph Save menu, and return to
1-2-3 READY mode.
You can now use the PrintGraph program to obtain hard copies
of the four graphs. Refer to the 1-2-3 manual for instructions on
how to use this program.
08/21/84 PROFIT - 15
Menu Tree for PROFIT Worksheet
Input - Input data and calculate results
Blank - Blank out input and result areas
. A_Case - Blank out column for case A
. B_Case - Blank out column for case B
. C_Case - Blank out column for case C
. D_Case - Blank out column for case D
. Quit - Do not blank out any column. Return to main menu.
Graph - Display graphs
. A_Case - Graph data for case A.
. . (see below)
. B_Case - Graph data for case B.
. . (see below)
. C_Case - Graph data for case C.
. . (see below)
. D_Case - Graph data for case D.
. . (see below)
. Each of the above choices leads to the following menu:
. . Cost - Dependent Factor is: cost per unit
. . . (see below)
. . Revenue - Dependent Factor is: revenue per unit
. . . (see below)
. . Fixed - Dependent Factor is: fixed costs
. . . (see below)
. . Profit - Dependent Factor is: $ profit before tax
. . . (see below)
. . Margin - Dependent Factor is: profit margin %
. . . (see below)
. . Sales - Dependent Factor is: $ sales
. . . (see below)
. . Units - Dependent Factor is: unit sales
. . . (see below)
. . Quit - Return to main menu
. . Each of the above choices leads to the following menu:
. . . Cost - Control Factor is: cost per unit
. . . Revenue - Control Factor is: revenue per unit
. . . Fixed - Control Factor is: fixed costs
. . . Profit - Control Factor is: $ profit before tax
. . . Margin - Control Factor is: profit margin %
. . . Sales - Control Factor is: $ sales
. . . Units - Control Factor is: unit sales
. . Quit - Return to main menu
. . . The following menu is displayed after the graph:
. . . . No - Do not save this graph on disk
. . . . Yes - Save graph (for future printing)
Print - Print input data and results
Agenda - Return to worksheet selection agenda
. No - Do not erase this worksheet. Return to main menu
08/21/84 PROFIT - 16
. Yes - Erase this worksheet and go to worksheet agenda
Quit - Exit to 1-2-3 READY mode.
08/21/84 PROFIT - 17
```

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ROR - Rate of Return Calculator
1. INTRODUCTION
This worksheet calculates the rate of return of a cash flow.
Rate of return is notionally equivalent to the interest or
discount rate that reduces the net present value of the cash flow
to zero. (The net present value of a cash flow at different
discount rates is calculated by the NPV worksheet.)
Rate of return is one measure of the value of a cash flow
that takes into account the time value of money (NPV is another
measure). The higher the rate of return, the more you can
discount future earnings and costs before the project becomes
unprofitable.
There are many ways to calculate rate of return, depending on
your assumptions about financing sources and profit reinvestment
opportunities. This worksheet uses three methods, described
below. The PAYOUT worksheet (on the Volume 1B disk) calculates a
project payout schedule, given the cash flow and interest rates
for loans and investments. That worksheet takes into account the
positive and negative balances accruing to the project. It also
has a goal-seeking option to find the loan interest rate that
reduces the project closing balance to zero. This is another way
of calculating a rate of return for the project.
2. CALCULATION METHODS
2.1 Introduction
As stated above, this worksheet
uses three methods. Each method corresponds to a different set
of assumptions about financing sources and profit reinvestment
opportunities. The three
methods typically lead to different values for the rate of return.
This does not mean that one is right and the others are wrong;
each one is correct according to its set of assumptions. The
following descriptions include a discussion of the advantages and
disadvantages of each method of calculation.
2.2 Internal Rate of Return
The first (and simplest) method of calculating rate of return
assumes that loans and investments make the same rate of return as
the project being evaluated. For example, if the rate of return
calculated by this method is 30%, the assumption is that the
interest rate on money borrowed to finance this project and the
yield obtained by reinvesting the profits are both 30% too.
Nevertheless, this method of calculating rate of return is the
most widely used. The result of this method is known as the
internal rate of return (IRR) because it makes no reference to
factors (such as discount or reinvestment rates) outside the cash
flow.
09/09/84 ROR - 1
The IRR method may fall down when the cash flow is not 'well
behaved'. The typical well-behaved cash flow has cash outflows at
the beginning, followed by cash inflows. When there is more than
one change of sign in the cash flow values, this method may yield
multiple rates of return. Such cash flows can occur (for example)
in income acceleration projects in the resource industries. Here,
an initial investment leads to an increased cash flow in early
years, but a reduced cash flow (over the 'do nothing' alternative)
in later years as the accelerated resource depletion takes its
toll. The cash flow for this project (compared with 'do nothing')
starts out negative, becomes positive, then returns to negative
again. Application of the simple method can yield two rates of
return - one reasonable, and one ridiculously large. The large
rate is mathematically correct, but assumes one could obtain that
same rate of return by reinvesting the profits from the project,
which is not usually practical.
2.3 Modified Internal Rate of Return
The second method avoids the multiple rate of return problem
by discounting all cash outflows to a single value in the opening
period using a specified discount rate. This single value may be
though of as the amount that would have to be invested now at the
discount rate to support the outflows. The cash outflows are then
replaced by this single outflow in period zero to give a modified
cash flow (which is then 'well behaved'). The rate of return of
this cash flow is calculated using the method described above.
The assumption behind this method is that an amount is invested
now at the discount rate and the proceeds are used to finance the
cash outflows. The rate of return is the rate which this amount
would have to yield (if invested) in order to return the same
positive cash flows (in amount and timing) as the cash flow
stream.
2.4 Financial Management Rate of Return
The third method goes one step further. It begins, like the
second method, by discounting all cash outflows to a single value
in the opening period using the specified discount rate. Then it
calculates the amount that would accrue in the final period if all
cash inflows were reinvested at a specified reinvestment rate for
the remainder of the project duration. The rate of return by this
method is the rate which the single value in the opening period
would have to yield (if invested) in order to accrue to the same
amount as the reinvested cash inflow values yield in the final
period.
2.4 General Comments
There are many sets of assumptions which one could defend
when evaluating a project. Each of the methods described above
has its flaws. The first assumes that surpluses yield the same
rate of return if reinvested (though supluses do not occur if the
rate of return is applied to a well-behaved cash flow). The
second and third methods do not take proper account of the
09/09/84 ROR - 2
deficits and surpluses that occur during the life of the project.
The PAYOUT worksheet calculates a payout schedule for a project,
given its cash flow and borrowing and reinvestment rates. This
schedule calculates the closing balance for each period, and uses
the appropriate rate depending on the sign of the balance. In
this respect, it may be thought of as 'more accurate'. It also
has a goal-seeking option, which yields the borrowing rate that
reduces to zero the closing balance in the final period (ie.
produces a breakeven project). Experimenting with the PAYOUT
worksheet can give a better understanding of rate of return. The
PAYOUT worksheet is contained on the Volume 1B disk in this
series.
3. USING ROR
3.1 Overview
The main menu of the ROR worksheet offers seven options (plus
Quit). They are as follows:
Input
This option leads to a menu of the items you may input.
This sub-menu allows you to enter the cash flow values by
period, the number of periods corresponding to a year, the
discount rate for cash outflows, the reinvestment rate for
cash inflows, and a first estimate of the internal rate of
return. The input process is described in more detail
below.
Blank
This option blanks out all input data and results (after
receiving confirmation that this is what you intend). It is
useful for clearing the worksheet before entering an
entirely new set of data.
Calc
The calculate option performs all calculations and displays
the three rates of return.
Results
This shows the results of the calculations. If there are
more than eleven periods in the cash flow (ie. it extends
beyond the bottom of the home screen) this option yields a
scroll menu that allows you to scroll the cash flow column
up and down to view the entire cash flow.
Graph
Two graphs are available in this worksheet. One shows the
cash flow and cumulative cash flow. The other shows the net
present value of the cash flow at discount rates between 0
and 100 percent. Both graphs can be displayed in monochrome
or color, as line charts, bar charts, or scatter (points
only) graphs.
09/09/84 ROR - 3
Print
The print option prints the cash flow, cumulative cash flow,
and results area.
Agenda
If you select this option (and confirm it when requested),
the current worksheet is lost and replaced by the worksheet
selection agenda. From there, you can load another
worksheet. Note confirmation is required before this option
proceeds because it overwrites the worksheet in memory.
3.2 Input Details
The Input option in the main menu leads to a sub-menu with
five options - Cashflow, Periods/Yr, DiscRate, ReinvRate, and
EstIRR. Each option allows you to enter part of the data.
The Cashflow option allows you to enter cash flow values, by
period. This option places the cell pointer at the top of the
cash flow column, and moves it down one cell each time you press
the Enter key. If you want to enter the entire cash flow, simply
type each number in turn and press the Enter key after each one.
Please note the following:
- A value must be entered for each period covering the
entire duration of the project and starting at period
zero. If the cash flow value for a particular period is
zero, enter zero. Do not leave the cell blank.
- Period zero is now, period one is one period (year,
month, or whatever) hence.
- Cash outflows must be entered as negative numbers; cash
inflows must be entered as positive numbers.
If you don't want to enter the whole cash flow (for example,
if you want to adjust a cash flow you've already entered) you may
use the cursor movement keys to place the cell pointer on any
number you want to change, and re-type it in normal 1-2-3 fashion.
When you press the Enter key, the macro will move the cell pointer
down one row.
The macro which drives this process has no way of knowing
when you've finished entering or changing data. When you have
finished, you must break out of the macro and re-invoke the input
menu. To do this, hold down the Ctrl key and press the Break key.
The CTL flag at the top of the screen will go out. Then hold down
the Alt key and press I to invoke the input menu.
The Periods/Yr option accepts the number of periods that
correspond to a year. If you have annual data, you must enter 1.
If you have monthly data, enter 12. This parameter is used to
convert the discount and reinvestment rates you enter from annual
rates to rates per period. It is also used to convert the rates
of return from rates per period to annual rates. Whatever the
periods your data represents, you always enter rates, and read
09/09/84 ROR - 4
results as annual rates.
The third choice in the input menu is DiscRate. It allows
you to enter the annual rate used to discount cash outflows back
to period zero.
The fourth choice is ReinvRate. It allows you to enter the
annual re-investment rate used to accumulate the future value of
the cash inflows in the final period.
The final option is EstIRR. Normally, you should leave this
at zero, and the worksheet will choose its own first estimate of
the internal rate of return. The worksheet will choose a value
which is close to the first change of sign of the net present
value. If the graph of net present value crosses the X-axis more
than once, there is more than one internal rate of return. In
this case, you may enter a discount rate close to the second
crossing, and the worksheet will calculate its rate of return
The last three options expect to receive only one number. To
enter the number, simply select the option from the input menu,
type the number, and press the Enter key.
3.3 Graph Details
This worksheet can produce two different graphs on either the
color or monochrome display. Each graph can take the form of a
line graph, a bar chart, or a scatter graph (points without
connecting lines). These are selected by means of a menu with
four choices.
The Cashflow graph displays the cash flow and cumulative cash
flow by period. The form of the graph will be the same as the one
that was last displayed. The NPV graph shows the net present
value against the discount rate in steps of 5% from 0% to 100%.
It shows how the net present value behaves as future values are
discounted more or less heavily. The discount rate (if any) at
which the graph crosses the X-axis represents the rate which
reduces the net present value of the cash flow to zero. This is
known as the internal rate of return of the cash flow.
The Type option presents a sub-menu from which you can select
the form of the graph. The three choices are Line, Bar, and
Scatter. Each choice re-displays the last graph in the selected
form, then returns to the graph menu.
The fourth choice - Options - allows you to choose the Color
or monochrome (B&W) monitor for the display. Again, each choice
re-displays the last graph on the selected device.
4. EXAMPLES
4.1 A Simple Investment
This example illustrates the use of this worksheet for a
09/09/84 ROR - 5
well-behaved cash flow. You have been given the opportunity to
purchase a note for $15,000. The note will return $5,000 at the
end of the first year, $7,000 at the end of the second year, and
$9,000 at the end of the third year. What is the internal rate of
return of this investment? Assuming you plan to re-invest the
returns from the note at 13% until the end of the third year, what
is the rate of return of this plan over the three year period.
(Note, method two does not apply in this case, because there is
only one cash outflow in period zero.)
Keystroke Comments
{ENTER} Select the Input option from the main menu.
P 1 {ENTER} Number of periods per year (the data is annual)
C Select the Cashflow option. The cell pointer will
go to the top of the cash flow column.
-15000 {ENTER} Value for period zero (now). Since this is a
payment (ie. a cash outflow) it is entered as a
negative number. When you press the ENTER key,
the cell pointer will move down to the next cell
in the column.
5000 {ENTER} Value returned at the end of the first year. This
is a cash inflow.
7000 {ENTER} Value returned at the end of the second year.
9000 {ENTER} Value returned at the end of the third year.
{Ctrl}{Break} To terminate the input loop, hold down the Ctrl
key and press the Break key.
{Alt} I To re-invoke the input menu, hold down the Alt key
and press I.
R 13 {ENTER} Re-investment rate, as an annual percentage.
Q Return to the main menu.
C Select the Calc option. The rate of return will
be calculated using the three methods.
G Select the Graph option from the main menu.
text {ENTER} Whenever you enter the graph menu, the system will
prompt you to enter a second title line for the
graphs. You may leave this line blank, or enter
any short description. To get rid of an existing
description before typing a new one, press the Esc
key.
09/09/84 ROR - 6
N This option displays a graph of the net present
value against the discount rates. Press any key
to return to the graph menu.
T L If the graph is not already a line graph, you can
go to the Type sub-menu to specify a line graph.
The graph will be re-displayed. Press any key to
return to the graph menu.
4.2 An Accelerated Income Project
Many projects in the resources industry are aimed at
accelerating resource recoveries. This leads to increased cash
flows in early years, followed by compensating decreased cash
flows in later years. Thus the cash flow consists of a series of
outflows (the investment), followed by a series of inflows (the
increased cash flows) followed by another series of outflows (the
reduced cash flows). This is not a 'well-behaved' cash flow.
You are considering the value of an enhanced recovery
project. The immediate cost of this project is $600. It will
increase cash flows in the next three years by $800, $500, and
$200 respectively. In the three years after that, however, cash
flows will be reduced by $200, $500, and $800 respectively. You
need to know the rate of return of this project. Future cash
outflows can be discounted at 10% p.a., and you can re-invest cash
inflows at 18% p.a.
Keystroke Comments
{ENTER} Select the input option from the main menu.
P 1 {ENTER} Number of periods per year (the data is
annual).
C Select the Cashflow option from the input menu.
The cell pointer will go to the top cell of the
cash flow column.
-600 {ENTER} Initial investment (in period zero). The cell
pointer will move down to the next period when you
press the Enter key.
800 {ENTER} Increases in cash flows in the first three years.
500 {ENTER}
200 {ENTER}
-200 {ENTER} Decreases in cash flows in the next three years.
-500 {ENTER}
-800 {ENTER}
{Ctrl}{Break} Hold down the Ctrl key and press the Break key to
break out of the macro. The CTL flag at the top
of the screen will go out.
09/09/84 ROR - 7
Alt I To re-invoke the input menu, hold down the Alt key
and press I.
D 10 {ENTER} Select the DiscRate option in the input menu to
enter the rate used to discount negative cash
flows back to period zero.
R 18 {ENTER} Select the ReinvRate option in the input menu, and
enter the re-investment rate for positive cash
flows.
Q Return to the main menu.
C Invoke the calculations.
The results of the calculation show that the internal
rate of return is 24%. But if you can only discount the
future cash outflows at 10% p.a. (instead of the 24% that
IRR assumes), the rate of return falls to almost zero. And
even if you can guarantee an 18% return on the cash inflows,
the rate of return is still only 13.05%. At this point, you
might be intrigued about this cash flow. One way to look at
it is to examine its net present value under different
discount rates. To do this, enter the following:
G Select the graph option.
text {ENTER} Each time you invoke the graph menu, it asks you
to enter the second title line for the graphs.
Enter any short description. To remove an
existing description before typing a new one,
press the Esc key.
N Select the NPV option in the graph menu to display
a graph of the net present value against the
annual discount rates. Press any key to return to
the graph menu.
T L Select a line graph. The graph will immediately
be re-displayed.
This graph shows that the net present value peaks at
under $50 when the discount rate is around 40%. But this
assumes that you can get a 40% rate of return on
investments, which is unlikely. And even then, the net
present value is very small. Clearly this is not a
profitable project, even though the internal rate of return
is impressive. You will also see that the net present value
curve crosses the X-axis at two points. The worksheet will
converge on the leftmost point, unless you enter a first
estimate of the rate of return that is closer to the
rightmost one. To find the rightmost rate of return, enter
(say) 65 for EstIRR in the input menu, and repeat the
calculations.
To exit from the menus, type the following:
09/09/84 ROR - 8
Q Return to the main menu.
Q Exit to 1-2-3 READY mode. If you want to return
to the main menu, hold down the Alt key and type
M.
09/09/84 ROR - 9
Menu Tree for ROR Worksheet.
Input - Enter Cashflow Values and Discount/Reinvestment Rates
. Periods/Yr - Enter number of periods per year
. Cashflow - Enter cashflow values
. DiscRate - Enter annual discount rate for cash outflows
. ReinvRate - Enter annual reinvestment rate for cash inflows
. Quit - Return to main menu
Blank - Clear Input Fields
. No - Cancel "Blank" Command
. Yes - Yes, Erase all input
Calc - Calculate Results
Results - Show Results
. Down - Scroll down one screen
. Up - Scroll up one screen
. Quit - Return to main menu
Graph - Display Graphs
. Cashflow - Display cashflow and cumulative cashflow
. NPV - Display net present value vs. discount rate
. Type - Select line graph, bar chart, or scatter plot
. . Line - Display line graph
. . Bar - Display bar chart
. . Scatter - Display scatter graph
. Options - Choose color or monochrome monitor
. . Color - Display graphs in color
. . B&W - Display graphs in monochrome
. Quit - Return to Menu
Print - Print Results
Agenda - Return to Worksheet Selection Agenda
. No - Do not clear this worksheet. Return to main menu
. Yes - Clear this worksheet. Go to selection agenda
Quit - Exit to 1-2-3 READY mode
09/09/84 ROR - 10
```

```
SREGR - Simple Linear Regression
1. INTRODUCTION
Linear regression is a method of finding the "best" straight
line through a set of points. Each point is described by two
values, and if there is a linear relationship between the values,
the points will lie close to a straight line when plotted on a
graph. For example, we might look for such a relationship
between:
- sales of the IBM PC and sales of the PC version of Lotus
1-2-3
- sales of Lotus 1-2-3 and of books about 1-2-3
- prime interest rate and business bankruptcies
In each of the above examples, we might be interested in
estimating the value of the second item (Y, the dependent var-
iable) given a value for the first item (X, the independent
variable). The SREGR worksheet will calculate the equation of the
best-fit straight line through pairs of X-Y values, and will
calculate estimates of Y, given X values, from the line. This
worksheet is a subset of the LREGR worksheet (contained on the
Volume 1B disk). It does not calculate any confidence limits, or
the significance of the Student's t value for the regression. As
a result, it can accept more pairs of input values for a
particular main memory configuration, and it calculates faster
than LREGR.
The worksheet accepts pairs of values (labelled Y and X), and
calculates the values of a and b in the equation Y = a + b X of
the best-fit straight line. a is often called the intercept,
because it is the point at which the line intercepts the Y-axis on
a graph, and b is the slope.
In addition to calculating the intercept and slope, the
worksheet calculates two of the parameters a statistician uses to
appraise the quality of the fit. These are:
- the correlation coefficient (r), which measures the degree
of association between X and Y. The value of r always lies
between 1 and -1. A value of zero indicates no
relationship; a value of +1 or -1 indicates a perfect
relationship. The correlation coefficient is negative when
larger values of X are associated with smaller values of Y.
- the value of Student's t for the hypothesis that the slope
(b) is zero (ie. changing the value of X doesn't have a
significant effect on the value of Y). The larger the value
of t, the less we are inclined to accept the hypothesis.
Note the SREGR worksheet does not calculate the significance
of this t-value in probability terms (but you can look it up
in standard statistical tables).
08/21/84 SREGR - 1
Statistical tables exist for the correlation coefficient and
Student's t, which give the probability that such a value (or
better) could be obtained purely by chance from random data.
For the purpose of estimating the coefficients (a and b) of
the regression equation, the worksheet uses all X-values for which
Y-values are supplied. These X-Y pairs must be entered in
consecutive rows, beginning at the top of the input area.
However, you may enter more X-values below the ones paired with
Y-values. The worksheet estimates the Y-values corresponding to
all the X-values you enter. This is useful if you want to use the
regression line as a forecasting pr estimating tool.
2. USING SREGR
The main menu of SREGR offers you seven choices (plus Quit).
They are as follows:
Input
This choice allows you to enter data to feed the
calculations, and to change the limit on the number of data
items you may input. There are two types of data: the raw
X-Y pairs from which the regression line is derived, and
additional X values for which Y estimates are calculated.
Note that changing the maximum number of data items involves
erasing all input data. Therefore, if you think you might
need more space than the worksheet initially allows (300
pairs), you should change the limit before you enter any
data.
Blank
You should choose this option if you have finished with the
data in the worksheet and want to start again with an empty
worksheet. Note that this option wipes out all calculated
results as well as the raw data. (You must confirm this
choice to reduce the risk of accidental erasure.)
Calc
Make this choice when you want to calculate or recalculate
the results. If you have changed data or entered more data
since you last calculated, you must recalculate before
displaying new results or graphs.
Results
This option guides you through the various results areas in
the worksheet. The main results are all shown in the home
screen. But there is a screen full of intermediate results
(averages and sums of squares, for example). And alongside
the columns in which you entered the raw data are calculated
Y estimates. To print your results, select Print from the
main menu (see below).
Graph
One of the clearest ways to show a linear regression is
08/21/84 SREGR - 2
though a graph. This worksheet offers one graph - a simple
one showing the original data points and the regression line
through them.
Print
The print option allows you to send selected areas of the
worksheet to your printer. You can select two different
areas: the final and intermediate results areas (as one
page), and the raw data and Y estimates.
Agenda
If you select this option (and confirm it when requested),
the current worksheet is lost and replaced by the main
agenda. Then you can load another worksheet from the disk.
Note confirmation is required before this option proceeds,
because it will overwrite the worksheet in memory.
2.1 Input Details
The input phase allows you to enter data in a variety of
ways. The input menu has five choices (plus Quit).
The first and second choices (XYPairs and YXPairs) are very
similar. If your source data is arranged as two columns of
numbers, these choices will handle all pointer movement as you
enter your data row-by-row. If the X column is on the left,
select XYPairs; if the Y column is on the left, select YXPairs.
Then enter your data one row at a time. Type the number on the
left first, then the number on the right. After each number,
press the ENTER key. Note that in the worksheet the Y column is
always on the left. Selecting XYPairs or YXPairs merely
determines which column receives the first number of each pair you
type. These two options (and Est-X) are convenient if you want to
use the numeric pad on your keyboard to enter the numbers, because
they perform all the necessary cursor movement for you. You can
press the Num Lock key to disable the cursor movement keys, and
use the numeric pad for numbers. (Remember to press the Num Lock
key again when you've finished entering your data, to re-activate
the cursor movement keys.) When you have entered all your data,
hold down the Ctrl key and press Break. This will stop the macro
and exit to 1-2-3 READY mode. Then hold down the Alt key and
press I to return to the input menu. If you choose either XYPairs
or YXPairs when you have already entered some data, the new data
will be added to the bottom of the existing pairs (but overlaying
any unpaired X values for which Y estimates were required). To
get rid of existing pairs, you must use the Blank option from the
main menu.
The third choice is Est-X. It allows you to add a column of
unpaired X values below the existing data. The worksheet will
calculate a Y estimate for each unpaired X value you enter. Type
each value for X, and press the ENTER key. When you have entered
all the values, hold down the Ctrl key and press Break. This will
stop the macro and exit to 1-2-3 READY mode. Then hold down the
Alt key and press I to return to the input menu.
08/21/84 SREGR - 3
The fourth choice uses the standard 1-2-3 Range Input facil
ity. In some respects this is convenient, because it confines the
cell pointer to the unprotected cells in the X and Y input
columns. And pressing the Esc key returns you directly to the
input menu. However, you are responsible for all cursor movement
within the input area. So you cannot easily use the numeric pad
to enter your numbers with this option. Remember to enter Y
values on the left (column B), and X values on the right (column
C).
The final choice (except Quit) in this menu is Number. It
allows you to set the maximum number of input values. When the
SREGR worksheet is first loaded, it is limited to 300 pairs of
input values. If your machine has less than 256K of memory, you
will not be able to enter even this many pairs without a 'Memory
Full' error. However, if your machine has more memory, you may
use this option to increase the amount of data you can input. You
must confirm your intention to use this option, because it will
erase any data in the input area.
There will come a time when you have entered data into the
worksheet, but you need to re-size the input area (for example,
because you underestimated the amount of data). When you re-size
the area, the worksheet will erase your input. But you can use
the /File Xtract option of 1-2-3 to save the data you have entered
and avoid re-typing it. Here's how.
To save the input data, first exit to 1-2-3 READY mode,
then press the Goto key (F5), type the word 'input', and
press the ENTER key. You will find yourself at the top left
corner of the input area. Then type the following 1-2-3
command (initial letters only):
/File Xtract Values
1-2-3 will prompt you for a file name. Choose a name for
the data, type it, and press ENTER. If a file with this
name already exists, 1-2-3 will ask you if it may be
replaced (ie. if 1-2-3 may overwrite it). When you have
chosen the file name, 1-2-3 asks you to specify the range to
be saved. Press the keys Right End Down in sequence,
followed by the ENTER key. Here, Right means the 6 key on
the numeric pad (in cursor mode), and Down means the 2 key.
1-2-3 will then save your data on disk, and you may proceed
to re-size the input area. (Hold down the Alt key and press
M to return to the main menu.)
When you have re-sized the input area, you can retrieve
your data from the disk by exiting to 1-2-3 READY mode and
moving to the top left corner of the input area (as
described above). Then type the following 1-2-3 command
(initial letters only):
/File Combine Copy Entire-file
1-2-3 will present a menu of the files on disk, from which
08/21/84 SREGR - 4
you should select the one you saved (or type its name) and
press the ENTER key. 1-2-3 will then retrieve your data
from the disk into the worksheet. Hold down the Alt key and
press M to return to the main menu.
There is one more option available to you for inputting data
to this worksheet. That is to use the 1-2-3 commands. For
example, you may already have the input data for your regression
analysis stored in a worksheet on disk. If the data occupies two
adjacent columns in the worksheet, with Y values in the left
column, you can use 1-2-3's /File Combine Copy command to copy the
data into the LREGR worksheet. To do this, simply choose Quit at
the main menu, press the Goto key (F5), type the word 'input', and
press ENTER. You will find yourself at the top left corner of the
data input area. Now you can type /fcc and follow the remaining
1-2-3 instructions to copy the data from the worksheet on disk.
When you have finished, hold down the Alt key and press I to
return to the input menu. Note, do not use /Move to move data
around in the worksheet. Moving data into a named range
invalidates the range name along with any formulas that depend on
it. You will probably destroy the worksheet's ability to
calculate properly if you use /Move commands in it.
2.2 Graph Details
The macro that displays the graph in this worksheet
deliberately avoids setting many of the graph parameters. For
example, the labels for the X- and Y- axes are initially set when
the worksheet is loaded, and are not changed. If you wish to use
your own labels, exit to 1-2-3 READY mode and change them. Then
hold down the Alt key and press M to return to the main menu. The
following is a list of the graph options that are set by the
macro. Attempts to reset these options will be futile.
- Graph subtitle
- Graph type and ranges
- Legends for ranges
- Range formats
To get a printed copy of any graph, first display it using
the graph menu. The last-displayed graph is called the current
graph. Then exit to 1-2-3 READY mode. Press the Graph key (F10),
and verify the graph. If you wish, you may use the 1-2-3 /Graph
commands to modify the graph before printing. Then type the
following 1-2-3 command (initial letters only):
/Graph Save
1-2-3 will ask you to specify a file name, and save the graph in
that file. You may then use the PrintGraph program to print the
graph. For instructions on how to use the PrintGraph program,
read the PrintGraph section of the 1-2-3 manual.
2.3 Print Details
The print macros assume you have a printer capable of 80-
08/21/84 SREGR - 5
column printing. Before printing each option, the macros allow
you to align the paper to the top of a new page. Press the ENTER
key when you are ready for printing to begin. At the end, the
macro will feed the paper to the top of a new page so that,
normally, you won't have to keep re-aligning the paper.
The final and intermediate results are printed as one,
because they will comfortably fit onto a 66-line page. The third
option can lead to several pages of output. The macro defines the
top border of the page to be the rows of the worksheet that
identify the columns being printed.
3. EXAMPLES
3.1 Radio or Television?
In the U.K., one must buy a television licence before one can
legally receive television programs. Prior to 1971, a radio
licence was required to receive radio signals, unless one bought a
television licence which covered both. With the rise of tele-
vision in the home, one might expect a fall in the number of radio
licences issued. Indeed, one might expect that for every
television licence bought, one less radio licence would be sold,
since most people owned radios before they bought televisions.
The numbers of radio and television licences issued for the years
1949 to 1968 are shown in the following table:
Radio and Television Licences
Issued in the United Kingdom.
YEAR RADIO TELEVISION
(Millions)
1949 11.7 0.1
1950 12.0 0.3
1951 11.6 0.7
1952 11.2 1.4
1953 10.7 2.2
1954 10.2 3.2
1955 9.4 4.4
1956 8.6 5.6
1957 7.6 6.8
1958 6.6 8.0
1959 5.4 9.2
1960 4.5 10.4
1961 3.9 11.2
1962 3.5 11.9
1963 3.2 12.5
1964 3.0 13.0
1965 2.8 13.3
1966 2.6 13.7
1967 2.5 14.3
1968 2.5 15.0
This table clearly shows the growth of television licences at
08/21/84 SREGR - 6
the expense of radio licences. The data in this table is
contained on your disk in a worksheet named TV. To use it to
illustrate the regression analysis, perform the following steps:
1. Load the SREGR worksheet and when the main menu appears,
Press Q to exit to 1-2-3 READY mode.
2. Press the Goto key (F5), then type the word 'input' and
press the ENTER key.
3. Type the following 1-2-3 command (initial letters only):
/File Combine Copy Entire-file TV
and press the ENTER key. This will bring the saved data
into the input area of your worksheet.
4. Hold down the Alt key and press M. This will return you to
the main menu.
5. Choose the Calc option. When calculations are complete, you
may use the results, graph, and print phases.
The results show a highly significant correlation. The
surprising part of the answer, however, is that the slope of the
regression line is -1.425, and not, as one might expect, -1.
Moreover the standard deviation of the slope - S(b) - is so small
(0.03) that it is inconceivable that the real slope is -1 given
the observations we have. This means the increase in the number
of television licences sold exceeds the decrease in the number of
radio licences by about 40%. Since anyone who bought or rented a
television almost certainly used a radio, one must look for an
explanation.
A possible explanation for the difference is that radio
licences were not treated seriously. It was common for people to
use unlicenced radio receivers, and few were prosecuted. But when
television licences were introduced, the need for a licence was
publicised, and users of unlicenced televisions were prosecuted
more actively. The 40% difference is likely due to people buying
a television licence when before they did not bother to buy a
radio licence. Another likely explanation is that the population
of viewers was growing in total.
The correlation coefficient (r) for this particular
regression is -0.9962, which is very close to -1 (meaning perfect
correlation). If you examine the graph, you will see that the
points do indeed lie very close to a straight line.
A note of warning is in order here. It can be very dangerous
to assume that a cause-and-effect relationship exists between two
factors, even when the fit is this good. One should take the
results of any statistical analysis with a large grain of salt,
unless there is a prior expectation of cause-and effect. In this
particular case, we do have such expectation because owning a
television licence removed the need to buy a radio licence.
Measurements such as these that are taken over a period of time
can be influenced by external factors which change over time.
This can lead to an apparent relationship when in fact none
exists. For example, television sales over some years were
positively correlated with admissions to mental institutions.
This statement could hardly justify an assertion that televisions
08/21/84 SREGR - 7
cause mental illness! Both simply happened to be growing over the
period the figures were observed.
3.2 Example 2 - Fictitious Data
This example leads you through a complete analysis of the
data given in the following table:
Linear Regression
Fictitious Data
X value Y value
1 3
3 5
5 6
7 8
9 12
11 12
Once you have loaded the SREGR worksheet, the following
keystrokes will perform the analysis:
Keystrokes Comments
{ENTER} Press the ENTER key to select the Input choice in
the main menu.
X Choose the XYPairs option in the input menu,
because this is how the source data is arranged.
Note that the macro will place the cell pointer in
the topmost cell of the X value input column.
1 {ENTER} This enters the first X value in the top cell.
The macro will move the cell pointer one column to
the left to receive the first Y value.
3 {ENTER} Enters the first Y value. The macro will now move
the cell pointer to the right and down so you can
enter the second X value.
3 {ENTER} Enter the remaining values.
5 {ENTER}
5 {ENTER}
6 {ENTER}
7 {ENTER}
8 {ENTER}
9 {ENTER}
12 {ENTER}
11 {ENTER}
12 {ENTER}
{Ctrl} {Break} Having entered all the pairs of values, hold down
the Ctrl key and press Break. This stops the
08/21/84 SREGR - 8
macro, and returns you to 1-2-3 READY mode.
{Alt} I Hold down the Alt key, and press I. This returns
you to the input menu.
E Select Est-X to obtain estimates of Y for
specified X values. The macro positions the cell
pointer at the first cell in the X input column
below the values you have already input.
0 {ENTER} Enter the X values for which estimates are
required.
2 {ENTER}
4 {ENTER}
6 {ENTER}
8 {ENTER}
10 {ENTER}
12 {ENTER}
{Ctrl} {Break} Return to the input menu.
{Alt} I
Q Return to main menu.
C Perform the calculations.
At this point, all the results have been obtained, and you
can display them by choosing Results in the main menu. Here's how
(starting at the main menu):
R Takes you to the Results menu from the main menu.
{ENTER} Displays the final results on the 'home' screen.
(Typically, you will already be on the home
screen, and this option will have no visible
effect.) On this screen, you can read the
calculated regression equation, the correlation
coefficient, and the Student's t value for testing
the significance of the regression.
I Displays the intermediate results. Here you can
see the number of (paired) observations, and the
mean of the (paired) X and Y values. The last
line on this screen shows the standard deviation
of the slope, which is used to derive the
Student's t statistic for the significance test of
the regression.
R Displays the raw data. The display starts at the
first screen-full of data, but you are presented
with a menu that allows you to scroll up and down
one screen-full at a time. Note the macro sets up
a window so the column headings are always
displayed above the data columns. You will not
need to scroll for this small set of data.
08/21/84 SREGR - 9
Q Returns you to the results menu.
Q Returns you to the main menu from the results
menu.
You can display the graph provided by this worksheet as
follows:
G Takes you from the main menu to the graphics menu.
Initially, the graphs are set up to display on a
color monitor. If you have a monochrome monitor
(with a graphics adaptor card), you should type
the following three commands:
O Selects the graphics options menu.
B Tells 1-2-3 to plot graphs in monochrome (B&W).
Q Returns you to the graphics menu.
R Displays the graph showing the raw data points,
and the regression line through them. From this
graph, you can see how well (or not) the points
follow the straight line. Press any key to return
to the graphics menu.
Q Returns you to the main menu.
If you wish, you may Quit all menus and set up the graph
title (not subtitle), and the X- and Y-axis legends to suit your
needs. Then use Alt-M to return to the menus and re-display the
graph. Since the graphics macro does not reset these parameters
each time, they will appear on the graph as you have set them.
To print the results, first make sure your printer is turned
on and loaded with paper. Then, from the main menu, type the
following:
P To go to the print menu.
R To print the final and intermediate results.
Press ENTER when you are ready for printing to
begin.
D To print the raw data and Y estimates. Press
ENTER when you are ready for printing to begin.
Q To return to the main menu.
Before starting each section of output, the macros pause for
you to align the paper. After each section of output, they space
to the top of the next page, so you should only have to align the
paper once - before the first section.
08/21/84 SREGR - 10
Menu Tree for SREGR Worksheet
Input - Input X-Y data.
. XYPairs - Input X-Y pairs of values (X first).
. YXPairs - Input Y-X pairs of values (Y first).
. Est-X - Enter X values to obtain Y estimates.
. Range - Use 1-2-3 standard Range Input facility.
. Number - Set maximum number of data pairs (erases data).
. . No - Do not erase or resize data area.
. . Yes - Erase and resize data area.
. Quit - Return to main menu.
Blank - Blank out data input area.
. No - Do not blank out input area; return to main menu.
. Yes - Blank out input area, then return to main menu.
Calc - Calculate all results.
Results - Display results on the screen.
. Final - Show final results (regression equation, etc.).
. Intermed - Show intermediate results (sums of squares, etc.).
. Rawdata - Show raw input data and Y estimates.
. . Down - Scroll down one screen.
. . Up - Scroll up one screen.
. . Quit - Return to results menu.
. Quit - Return to main menu.
Graph - Display graphs.
. Rawdata - Display graph of input data and regression line.
. Options - Select graph options.
. . Color - Display graphs in color.
. . B&W - Display graphs in monochrome.
. . Quit - Return to graph menu.
. View - Re-display the last-seen graph.
. Quit - Return to main menu.
Print - Send results to printer.
. Results - Print final and intermediate results.
. Data - Print raw data and Y estimates.
. Quit - Return to main menu.
Agenda - Return to worksheet agenda.
. No - Do not leave this worksheet; return to main menu.
. Yes - Clear this worksheet and load agenda.
Quit - Exit to 1-2-3 READY mode.
08/21/84 SREGR - 11
```

```
Volume in drive A has no label
Directory of A:\
AGENDA WKS 2432 1-01-80 1:11a
AUTO123 WKS 7168 1-01-80 1:10a
BSTAT DOC 18268 9-09-84 6:50p
BSTAT WKS 18432 8-22-84 9:27p
DEPREC DOC 24828 9-09-84 6:53p
DEPREC WKS 25216 8-22-84 9:29p
INTRO DOC 6194 9-09-84 2:39p
NPV DOC 20848 9-09-84 6:56p
NPV WKS 12288 8-22-84 9:30p
PRINTDOC BAT 768 9-09-84 12:28p
PROFIT DOC 44909 8-21-84 11:13p
PROFIT WKS 18944 8-22-84 9:32p
README 1ST 15115 1-01-80 1:23a
ROR DOC 27055 9-09-84 7:02p
ROR WKS 14976 8-22-84 9:33p
SREGR DOC 33180 8-21-84 11:09p
SREGR WKS 12032 8-22-84 9:34p
TEST WKS 10112 1-01-80 1:33a
TV WKS 2816 3-15-84 7:37p
19 file(s) 315581 bytes
0 bytes free
```