When you explain your financial model to another person, you start with the purpose for your model and the precise things you want to calculate. How the calculation proceeds is of secondary importance as the other person can go through the cells in Excel if they really care. Your models will be simpler and more robust if you bear this general principle in mind when you build them.
Join us to hear from mathematician, data scientist and financial modeller Dr John Graham as he takes us through some practical examples such as calculating the internal rate of return (“IRR”) of an investment. Formally, r is a IRR if the net present value of the cash flows is zero. It is a simple exercise for a new modeller to calculate the net present value of a series of cash flows, so it is routine to verify that you have an IRR. But how does one actually find an IRR? Does one exist and is it unique? More generally, how many IRRs are there? For fun, we will look at these questions.
Stepping back, when you build a financial model for an investment, it is easy to write formulae to verify that a financing meets the requirements of debt and equity providers. How do we find financing parameters which meet the requirements and maximise returns? We use goal seek, solver, or macros. Part of the appeal of using a spread sheet is that you offload the nitty gritty of solving the “How” to the computer. Unfortunately, these tools can fail, and indeed the solutions may not exist so this is more an art than a science. The talk will conclude with some examples.
• About your Speaker
John Graham has a PhD and BA in Pure Mathematics from the University of Sydney and received a silver medal at the International Mathematical Olympiad in Helsinki in 1985. John’s expertise is in financial modelling and analytics, with a specific focus on energy and infrastructure. His models, built to value assets, inform decisions and provide comfort to debt and equity providers, combined with his deep mathematical skills, capture inherent industry economics and embedded optionality. Connect with John here: https://www.linkedin.com/in/john-graham-a5947b22/
• About your Host
Danielle Stein Fairhurst is a financial modelling specialist and the author of “Financial Modeling in Excel for Dummies” published by Wiley in 2017 and “Using Excel for Business Analysis; a Fundamental Approach to Financial Modelling”, Revised Edition published by Wiley Finance 2015. Danielle has regular engagements around Australia and globally as a speaker, course facilitator, financial modelling consultant and analyst, was a guest on Excel TV and has been interviewed for several industry podcasts. She founded the Financial Modellers’ Meetup groups in 2015 which now have over 5,000 members in seven countries as well as a LinkedIn forum with over 40,000 members. Connect with Danielle here: https://www.linkedin.com/in/daniellesteinfairhurst/
• What to bring
A laptop is not required for this session
• Meetup Format
We start the sessions with around 30 minutes of networking, a 45 minute presentation followed by 15 minutes of questions and discussion and conclude by 7.30 or 8pm.
This is a networking group so be sure to find someone to chat to before the session begins. If you’re new and not sure what to say, just ask someone what their favourite Excel function is and you’ll fit right in!