Determine impact of variables on rate of return
Let's say I have a base case situation where I expect a certain return, say 50/100 = 50%
Now I change a variable in my model and it adds 10 to both the numerator and the denominator, so 60/110 or 54.5%
In that example I can obviously tell that the variable improved my return by 4.5%. Simple enough.
When I add a second variable I can still calc the TOTAL impact of both variables, but I cant for the life of me figure out how to calc the individual impact of each variable on the TOTAL return.
To elaborate, using the example above, base case is 50/100 or 50%.
Variable A adds 10 to both numerator and denominator
Variable B adds 20 to the denominator only
So my new return is 60/130 or 46.2%. Overall these two
variables together decreased my return by 3.8%. However, I need to determine the impact of each variable on the total return.
The solution I'm ultimately trying to get to would look something like this (making up numbers here):
impact of Variable A + impact of Variable B = -3.8%
-1.0% + -2.8% = -3.8%
In the example above, I am trying to calculate the -1.0% and the -2.8%. Any ideas on how to properly calculate this?