Business Finance 02b

1. 2b.1 Van Horne and Wachowicz, Fundamentals of Financial Management, 13th edition. © Pearson Education Limited 2009. Created by Gregory Kuhlemeyer.
Chapter 2b -
Support
The Business, Tax,
and Financial
Environments

2. 2b.2 Van Horne and Wachowicz, Fundamentals of Financial Management, 13th edition. © Pearson Education Limited 2009. Created by Gregory Kuhlemeyer.
Solving Corporate
Tax Questions
• Sample of how to use
Excel to calculate
various items
• The “Inputs” section
represents the only
needed inputs into Excel
– yellow color
• The “Outputs” are
generated items based
on the internal modeling
in Excel – blue color

3. 2b.3 Van Horne and Wachowicz, Fundamentals of Financial Management, 13th edition. © Pearson Education Limited 2009. Created by Gregory Kuhlemeyer.
So what do we need to
calculate these variables?
• Corporate Taxable Income
(Input)
• Corporate tax model
• Excel skills in VLOOKUP and
formula creation skills

4. 2b.4 Van Horne and Wachowicz, Fundamentals of Financial Management, 13th edition. © Pearson Education Limited 2009. Created by Gregory Kuhlemeyer.
Tax Table in Excel
What is “behind the scenes” in calculating the marginal
rate, tax liability and average tax rate?
… it is the same tax table from your text recreated!

5. 2b.5 Van Horne and Wachowicz, Fundamentals of Financial Management, 13th edition. © Pearson Education Limited 2009. Created by Gregory Kuhlemeyer.
Tax Table in Excel
Once I create the table, how do I calculate the marginal
rate and tax liability?
… use VLOOKUP (refer to file VW13E-02b.xlsx)!

6. 2b.6 Van Horne and Wachowicz, Fundamentals of Financial Management, 13th edition. © Pearson Education Limited 2009. Created by Gregory Kuhlemeyer.
So how do we create
yield curves?
1. Determine what relationship(s)
you need to evaluate
2. Determine where you can locate
the data
3. Transfer data into Excel and
create a “Scatter with Smooth
Lines and Markers”
4. Let us go through an example.

7. 2b.7 Van Horne and Wachowicz, Fundamentals of Financial Management, 13th edition. © Pearson Education Limited 2009. Created by Gregory Kuhlemeyer.
So how do we create
yield curves?
We have
gone to the
US Treasury
web site
(ustreas.gov)
and have
located the
daily rates for
April 2008!

8. 2b.8 Van Horne and Wachowicz, Fundamentals of Financial Management, 13th edition. © Pearson Education Limited 2009. Created by Gregory Kuhlemeyer.
So how do we create
yield curves?
• Highlight the
data from the
previous web
page and
copy it to
your
clipboard.
• Paste it into
Excel for the
example on
the right.

9. 2b.9 Van Horne and Wachowicz, Fundamentals of Financial Management, 13th edition. © Pearson Education Limited 2009. Created by Gregory Kuhlemeyer.
So how do we create
yield curves?
• Pull the data
that you want
to graph.
• The “green”
highlighted
data represents
April 16, 2008.
• The “blue”
highlighted
area represents
the maturity of
the instrument.

10. 2b.10 Van Horne and Wachowicz, Fundamentals of Financial Management, 13th edition. © Pearson Education Limited 2009. Created by Gregory Kuhlemeyer.
So how do we create
yield curves?
• In Excel you now click
the “Insert” tab
• Click on the down
arrow under “Scatter”
on the ribbon
• Choose “Scatter with
Smooth Lines and
Markers”
• Complete your graph
as you desire.
• This represents a
“typical” shaped Yield
Curve (Treasuries)
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
5
0 5 10 15 20 25 30
YTM
U.S. Treasury Maturity
4/16/2008
Refer to VW13-02.xlsx for the above data and graph.