Goal Seeking

Excel includes a tool that makes it very easy to play "what if" by making changes in a variable. While you could make the changes manually, it is much easier to allow Excel to adjust the variable for you to reach a desired result.

For instance, let's suppose that you want to calculate how much money you will need to deposit in a savings account for each of 24 months in order to have $2,500 there at the end of the two years. You know the interest rate, but you are not sure of the amount. You put together a very, very simple future value calculator. In cell B4 is your deposit amount (unknown right now), cell B5 contains your interest rate 3.25% (nobody said this was a great investment vehicle), and cell B6 is the number of months (24). In cell B7 you enter the actual formula for the future value calculation, as follows:

= -FV(B5,B6,B4)

If you wanted to determine how much you needed to deposit in the account each month, you could repeatedly change the deposit value (cell B4) until you got close to the desired goal. This is where the goal seeking tool comes in, however. Follow these steps:

1. Select the Future Value cell (the one at B7).
2. Choose Goal Seek from the Tools menu. This displays the Goal Seek dialog box. The Set Sell field is already set to B7, which is the cell you selected in step 1.
3. Move the insertion point to the To Value field and change it to 2500. This is the amount you want to have at the end of two years.
4. Move the insertion point to the By Changing Cell field and use the mouse to click on cell B4 (the cell that will contain your regular deposit amounts).
5. Click on the OK button. Excel lets you know it has found a solution.
6. Click on OK. Your worksheet is changed to reflect the solution found.