{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

FM12 Ch 12 Tool Kit Simulation - Expl Chapter 12 Tool Kit...

Info icon This preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
135a39f703d0f8e4e3a8c7d9a402bb210a1aa60c.xls Expl. Michael C. Ehrhardt Page 1 06/15/2011 1/18/2007 Chapter 12: Tool Kit for Monte Carlo Simulation Overview of this Workbook This workbook has five workbooks. Following is a brief description of each worksheet. The fifth worksheet, "Sim. Summary", contains summary statistics from the simulation. Creating Simulated Random Variables Step 1: Load Simtools.xla Step 2: Decide on distributions for risky variables If an error box like the picture (which is only a picture and not an actual error message) displayed at the right appeared when you opened this file, then you have not correctly installed the Excel Add-In, Simtools.xl a. You should close Excel without saving and read the instructions in the file " Explanation of Simulation.doc ," which explains how to install Simtools.xla . Only open this Excel file, FM12 Ch 12 Tool Kit Simulation.xls , after you have correctly installed Simtools.xla . This worksheet contains the model used to analyze RIC's new project decision as described in the text. It is the same model as in " FM12 Ch 12 Tool Kit.xls ," but with a Monte Carlo simulation added. There are many available simulation software packages, such as @Risk, but they are not free. For the analysis in this spreadsheet, we have used a free package that works very well for simple simulations. If your model is very complicated, then you would be better off using one of the commercial packages. But for simple models, the approach we show in this spreadsheet will work fine. We assume that you have correctly installed an Excel Add-In, Simtools.xla, developed by Professor Roger Myerson at Northwestern University. If not, then close Excel and read the instructions in the file " Explanation of Simulation.doc ." For more information on Simtools, go to the web site http://www.kellogg.nwu.edu/faculty/myerson/ftp/addins.htm. This first worksheet, "Expl.", describes how to create simulated variables to be used as inputs in a financial model. The second worksheet, "Model to be Sim.", contains the financial model for which the simulation analysis will be conducted. The third worksheet, "Sim. inputs and outputs," contains the actual simulated values that are used as inputs to the financial model. It also contains the resulting key outputs from the model. We find that it is convenient to have inputs and outputs located near one another. The fourth worksheet, "Run Sim.", explains how to run the simulation. It also contains the actual raw results from the simulation. Make sure Simtools is available, using the procedure described in the file " Explanation of Simulation.do
Image of page 1

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
135a39f703d0f8e4e3a8c7d9a402bb210a1aa60c.xls Expl. Michael C. Ehrhardt Page 2 06/15/2011 Sales Price: Normal distribution Mean= 3.00 Standard deviation= 0.35 Variable costs: Triangular distribution Lower bound= 1.40 Most likely= 2.10 Upper bound= 2.50 Unit sales: Triangular distribution Lower bound= 15,000 Most likely= 20,000 Upper bound= 30,000 Note: These are just examples. The actual inputs are on the worksheet "Sim. inputs and outputs."
Image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern