Exploring Microsoft® Excel® 2016 Series Editor Mary Anne Poatsy

Exploring Microsoft® Excel® 2016 Series Editor Mary Anne Poatsy
Exploring Microsoft Office 2016 Series Editor Mary Anne Poatsy Mulbery|Davidson Series Created by Dr. Robert T. Grauer

Copyright © 2017 Pearson Education, Inc.
Chapter 6 In Chapter 6, you will expand your knowledge of Excel by learning how to use decision-making tools. What-If Analysis Using Decision-Making Tools Copyright © 2017 Pearson Education, Inc.

Objectives Create and Maintain Range Names Create a One-Variable Data Table Create a Two-Variable Data Table Determine Optimal Input Values Using Goal Seek Use Scenario Manager Load the Solver Add-In Optimize Results with Solver The objectives for this chapter are: Create and Maintain Range Names Create a One-Variable Data Table Create a Two-Variable Data Table Determine Optimal Input Values Using Goal Seek Use Scenario Manager Load the Solver Add-In Optimize Results with Solver Copyright © 2017 Pearson Education, Inc.

Objective 1: Create and Maintain Range Names
In this section, the skills include: Create a Range Name Edit or Delete a Range Name Use Range Names in Formulas Insert a List of Range Names Skills:  Create a Range Name  Edit or Delete a Range Name  Use Range Names in Formulas  Insert a List of Range Names Copyright © 2017 Pearson Education, Inc.

Create and Maintain Range Names
Type range name Select cell A range name is a word or string of characters assigned to one or more cells. A range name can contain up to 255 characters, but it must begin with a letter or an underscore, and you can use a combination of upper- or lowercase letters, numbers, periods, and underscores throughout the range name. To create a range name, you select the range you want to name, and complete one of the following steps: Click in the Name Box, type the range name, and then press Enter. Click the Formulas tab, click Define Name in the Defined Names group to open the New Name dialog box, type the range name in the Name Box, and then click OK. Click the Formulas tab, click Name Manager in the Defined Names group to open the Name Manager dialog box, click New, type the range name in the Name Box, click OK, and then click Close. In this example, we are naming the single cell B10 as Periodic_Rate. Note the use of the underscore to give the appearance of two words. Why was the range not named Periodic Rate? Copyright © 2017 Pearson Education, Inc.

Select range name Edit or delete To edit, delete, or create range names, you: Click Name Manager in the Defined Names group on the Formulas tab to open the Name Manager dialog box. To edit a range or range name, click the range name in the list and click Edit. In the Edit Name dialog box, make your edits and click OK. Copyright © 2017 Pearson Education, Inc.

Double-click Tax_Rate Type = P You can use range names in formulas instead of cell references. For example, if cell B1 contains a purchase amount, and cell B2 contains the sales tax rate, instead of typing =B1*B2, you can type the range names in the formula, such as =Purchase*Tax_Rate. Can you see how this makes understanding the purpose of the formula much easier? When you type a formula, Formula AutoComplete displays a list of range names, as well as functions, that start with the letters you use as you type. Double-click the range name to insert it in the formula. This example shows that the user has typed =P and selected Purchase from the range names, then typed *ta and will then select Tax_Rate from the list to complete the formula. Copyright © 2017 Pearson Education, Inc.

Objective 2: Create a One-Variable Data Table
In this section, the skills include: Set Up One-Variable Substitution Values Add Formulas to a One-Variable Data Table Calculate Results Format a One-Variable Data Table Skills:  Set Up One-Variable Substitution Values  Add Formulas to a One-Variable Data Table  Calculate Results  Format a One-Variable Data Table Copyright © 2017 Pearson Education, Inc.

Create a One-Variable Data Table
Click Fill First substitution value 5% in D4 Increment value Select columns A one-variable data table is a structured range that contains different values for one variable to compare how the different values affect one or more calculated results. For example, a one-variable data table is used to compare monthly payments on a mortgage. After determining the variables to manipulate, you need to specify the substitution values. A substitution value is a value that replaces the original input value of a variable in a data table. You can enter the substitution values yourself or use the Series dialog box to help complete a series of values. To use the Series dialog box, you: Type the first substitution value and keep that cell as the active cell. On the Home tab in the Editing group, click Fill and then select Series to open the Series dialog box. Click Rows or click Columns to select the direction of the series of substitution values. Enter the value increment in the Step value box, enter the ending value for the series in the Stop value box, and click OK. In this example, the first substitution value is 5% in cell D4; Columns is clicked so the series of substitution values is down a column, the increment value is .5 %, and the stop value is 9%. Stop value Copyright © 2017 Pearson Education, Inc.

Click What-If Analysis Drag down and right from starting cell Select column input cell After the substitution values have been added to a column or row, formulas must be added that relate mathematically to the variable that is used for the substitution values. To complete the one-variable data table, you: Select the data table boundaries, starting in the blank cell in the top-left corner of the data table. Drag down and to the right, and if there is more than one column, select the last blank cell at the intersection of the last substitution value and the last formula reference. On the Data tab in the Forecast group, click What-If Analysis and select Data Table to open the Data Table dialog box. Enter the cell reference of the cell containing the original variable for which you are substituting values. If the substitution values are listed in a row, enter the original variable cell reference in the Row input cell box. Similarly for a column, enter the original variable cell reference in the Column input cell box. Click OK. In this example, cell B4 is the original interest rate variable, which is entered in the Column input cell box because the substitution interest rates are in a column. Copyright © 2017 Pearson Education, Inc.

Cryptic column headings This slide shows the completed table based on the selections from the Data Table dialog box shown in the previous slide. However, the column headings that appear in data tables are the formulas used for the tables calculations. After creating the data table, you should format the values to reduce confusion and also create custom formats to disguise the formula references as column labels. Copyright © 2017 Pearson Education, Inc.

Meaningful column headings Type column text To create custom formats, you: Click in the cell containing a formula reference in the data table. On the Home tab in the Number group, and click the Number Dialog Box Launcher to open the Format Cells dialog box with the Number tab active. Click Custom in the Category list, scroll up in the Type list, and then select General in the list. Type the column heading in the Type box above the Type list and click OK two times. Note: The entered text must be enclosed in quotation marks. Copyright © 2017 Pearson Education, Inc.

Objective 3: Create a Two-Variable Data Table
In this section, the skills include: Set Up Two-Variable Substitution Values Add a Formula to the Data Table Calculate Results for a Two-Variable Data Table Skills:  Set Up Two-Variable Substitution Values  Add a Formula to the Data Table  Calculate Results for a Two-Variable Data Table Copyright © 2017 Pearson Education, Inc.

Create a Two-Variable Data Table
Cell reference =B12 Varying monthly payments There are times that you might want to compare results of a calculation based on two variables. A two-variable data table is a structured range that contains different values for two variables to compare how these differing values affect the results for one calculated value. For example, you might want to compare the combined effects of various interest rates and different down payments. Creating a two-variable data table is similar to the method used for a one-variable data table. For a two-variable data table, you use the top row for one variable’s substitution values and the first column for the other variable’s substitution values. The two-variable data table enables you to use two variables, but you are restricted to only one result instead of multiple results. Enter the formula or reference to the original formula in the blank cell in the top-left corner. For example, enter the cell reference for the monthly payment (=B12) in cell D3. Varying interest rates Copyright © 2017 Pearson Education, Inc.

Create a Two-Variable Data Table
After entering the substitution values and the reference to one formula result, you are ready to complete the table to see the results. To finish the two-variable data table: Select the data table boundaries, starting in the top-left corner of the data table. Drag down and to the right to select the last blank cell at the intersection of the last substitution value for both the column and the row. On the Data tab in the Forecast group, click What-If Analysis, and select Data Table to display the Data Table dialog box. Enter the cell that contains the original value for the substitution values in the first row in the Row input cell box. Enter the cell that contains the original value for the substitution values in the first column in the Column input cell box. Click OK. For example, the original row (down payment) variable value is stored in cell B3, and the original column (APR) variable value is stored in cell B4. This slide shows the completed and formatted Two-Variable Data table. Copyright © 2017 Pearson Education, Inc.

Objective 4: Determine Optimal Input Values Using Goal Seek
In this section, the skills include: Determine Optimal Input Values Using Goal Seek Skills:  Determine Optimal Input Values Using Goal Seek Copyright © 2017 Pearson Education, Inc.

Determine Optimal Input Values Using Goal Seek
Optimize Monthly Payment in B12 Optimize to 800 Goal Seek is a tool that enables you to specify a desired result from a formula without knowing what input value achieves that goal. Goal Seek works backward to identify the exact value for a variable to reach your goal. Goal Seek manipulates only one variable and one result and does not produce a list of values to compare. To use Goal Seek, you: Click What-If Analysis in the Forecast group on the Data tab. Select Goal Seek to open the Goal Seek dialog box. Enter the cell reference for the cell to be optimized in the Set cell box. This cell must contain a formula. Enter the result you want to achieve in the To value box. Enter the cell reference that contains the variable to in the By changing cell box. This cell must be a value, not a formula, which has a mathematical relationship with the cell containing the formula or goal. Click OK. In this example, our goal is to reach an $800 monthly payment by changing the Down Payment (cell B3) using the monthly payment formula (PMT) in B12. By changing Monthly Payment in B3 Copyright © 2017 Pearson Education, Inc.

Objective 5: Use Scenario Manager
In this section, the skills include: Create Scenarios Add and Edit Scenarios View Scenarios Generate a Scenario Summary Report Skills:  Create Scenarios  Add and Edit Scenarios  View Scenarios  Generate a Scenario Summary Report Copyright © 2017 Pearson Education, Inc.

Use Scenario Manager Click Add Click Edit Enter Changing cells You may want to compare several variables and their combined effects on multiple calculated results. This type of analysis involves identifying and setting up scenarios, which are detailed sets of values that represent different possible situations. Excel’s Scenario Manager is a what-if analysis tool that enables you to define and manage multiple scenarios to compare their effects on calculated results. To create a scenario you: Click What-If Analysis in the Forecast group on the Data tab. Select Scenario Manager to open the Scenario Manager dialog box. Click Add to open the Add Scenario dialog box. Enter the input cells for the scenario in the Changing cells box. These are the cells containing variable values that Scenario Manager will adjust or change. Click OK to open the Scenario Values dialog, which lists the changing cell references that you specified in the previous dialog box. In each respective box, type the value you want to use for that particular scenario. To edit a scenario, you repeat the first two steps for creating a scenario: Select Scenario Manager to open the Scenario Manager dialog box, but this time select the scenario you want to edit and click Edit. After you enter the updated values for the last scenario, click OK. To view a scenario, you repeat the first two steps for creating or editing a scenario: Again, select the scenario you want to edit and click Show. Enter values Click Show Copyright © 2017 Pearson Education, Inc.

Use Scenario Manager A scenario summary report is an organized structured table of the scenarios, their input values, and their respective results. The summary report displays in the form of a worksheet outline. To create a scenario summary report, you: Open the Scenario Manager dialog box. Click Summary to open the Scenario Summary dialog box. Click Scenario summary or click Scenario PivotTable report. Enter the reference for the cell(s) whose values change in the scenarios in the Result cells box. Click OK. Excel creates the Scenario Summary on a new worksheet. In this example, the result cells are monthly payment (B12), Total to Repay Loan (B13), and Total Interest Paid (B14). The scenario summary contains a column listing the changing and resulting cell references, current values and result values, and a column of values and results for each defined scenario. Result cells New worksheet Copyright © 2017 Pearson Education, Inc.

Load the Solver Add-In Solver Add-in added to Ribbon
Select Solver Add-in Add-ins are programs that can be added to Excel to provide enhanced functionality. Solver is an add-in application that searches for the best or optimum solution to a problem by manipulating the values for several variables within restrictions that you impose. You can use Solver to create optimization models. Optimization models find the highest, lowest, or exact value for one particular result by adjusting values for selected variables. To load Solver, you: Click the File tab and select Options. Click Add-ins to see a list of active and inactive add-in applications. Click the Manage arrow at the bottom of the dialog box, select Excel Add-ins, and then click Go to open the Add-ins dialog box. Click the Solver Add-in check box in the Add-ins available list and click OK. Copyright © 2017 Pearson Education, Inc.

Objective 7: Optimize Results with Solver
In this section, the skills include: Identify the Objective Cell and Changing Cells Define Constraints Create a Solver Report Configure Solver Save and Restore a Solver Model Skills:  Identify the Objective Cell and Changing Cells  Define Constraints  Create a Solver Report  Configure Solver  Save and Restore a Solver Model Copyright © 2017 Pearson Education, Inc.

Optimize Results with Solver
Solver’s three parameters: Objective cell—specifies the cell that contains the formula to be optimized Changing variable cells—contain variables whose values change within the constraints Constraints—specify the restrictions or limitations imposed on the model Solver requires three parameters—objective cell, changing variable cells, and constraints. Objective cell—specifies the cell that contains a formula that produces a value that you want to optimize (that is, maximize, minimize, or set to a value) by manipulating values of one or more variables. Changing variable cells—the cells containing variables whose values change within the constraints until the objective cell reaches its optimum value. Constraints—specify the restrictions or limitations imposed on a spreadsheet model as Solver determines the optimum value for the objective cell. Consider the mortgage example that we have been using: The objective cell would be the cell containing the total interest paid formula, which we would like to minimize. The changing variable cells would be the down payment and the number of years. The constraints could be that the down payment is between $5,000 and $8,000. Copyright © 2017 Pearson Education, Inc.

Click Add To specify the objective and changing cells and constraints, you: Click Solver in the Analyze group on the Data tab to open the Solver Parameters dialog box. Enter the cell containing the formula for which you want to optimize its value in the Set Objective box. Click an option in the To section to specify what type of value you need to find for the target cell. In our example, you would click Min and then specify the value in the Value Of box. Enter the cell references that contain variables in the By Changing Variable Cells box. Click Add to the right of the Subject to the Constraints list in Solver Parameters to open the Add Constraint dialog box. Enter the cell reference, the operator to test the cell reference, and the constraint the cell needs to match. Click OK to add the constraint and return to the Solver Parameters dialog box, or click Add to add the constraint and create another constraint. Remember: The objective cell would be the cell containing the total interest paid formula, which we would like to minimize. The changing variable cells would be the down payment and the number of years. The constraints could be that the down payment is between $5,000 and $8,000. Minimize Enter constraint Changing cells Copyright © 2017 Pearson Education, Inc.

Keep or Restore? To create a Solver report, you: Click Solve in the Solver Parameters dialog box. When Solver completes the iterative process, the Solver Results dialog box appears. If it finds a solution, the Reports list displays available report types. If Solver cannot reach an optimal solution, no reports are available. Click Keep Solver Solution to keep the changed objective and variable values, or click Restore Original Values to return to the original values in the worksheet. Select a report from the Reports list and click OK. Note: If you keep the changed values, Excel makes those changes to the actual worksheet. Select report Copyright © 2017 Pearson Education, Inc.

First section Second section Solver creates a new worksheet for the Solver summary report containing four major sections: The first section displays information about the Solver report. The second section displays the objective cell information. Specifically, this section shows the original and final objective cell values. The third section displays the variable cells. Specifically, it displays the cell references, the variable cell names, original values, and final values. The fourth section lists the constraints. It displays the cell reference, description, new cell value, formula, status, and slack for each defined constraint. (Not shown on the slide.) When you save a Solver model, you save the objective value, the changing variable cells, and the constraints. To save Solver settings, you: Click Load/Save in the Solver Parameters dialog box. Click in the worksheet where the first cell is to be placed. Click Save to return to the Solver Parameters dialog box. If you want to use an existing Solver model with new or updated data, you must return to a previous Solver model. To use a Solver model that you saved, you: Select the worksheet cells that contain the Solver data. Click Load to load the model’s values and return to the Solver Parameter dialog box. Third section New worksheet Copyright © 2017 Pearson Education, Inc.

Summary Excel What-If analysis tools: Variable Data Tables One-Variable—contains different values for one variable Two-Variable—contains different values for two variables Goal Seek—specify a desired result without knowing what input value achieves that goal Scenario Manager—define and manage scenarios to compare effects on calculated results Solver—searches for the best or optimum solution to a problem by manipulating values for several variables within imposed constraints. Excel provides several What-If analysis tools to aid in the decision-making process: Variable Data Tables One-Variable—contains different values for one variable to compare how the different values affect one or more calculated results. Two-Variable—contains different values for two variables to compare how the different values affect one or more calculated results. Goal Seek—a tool that enables you to specify a desired result from a formula without knowing what input value achieves that goal. Scenario Manager—a what-if analysis tool that enables you to define and manage scenarios to compare their effects on calculated results. Solver—an application that searches for the best or optimum solution to a problem by manipulating the values for several variables within imposed constraints. Copyright © 2017 Pearson Education, Inc.

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