APPLIED COMPUTING

FOR BUSINESS
Trang, Ha Thi Thu (Ph.D)
SEM - HUST
 CONTENTS

01 02 03 04
05
WORKING EXCEL DATA DATA
WITH BASIC EXTRACTION ANALYSIS
SPREADSHEE FUNCTION AND DATA
T MANAGEMEN
T MODEL

2
CHAPTER 5: DATA MODEL

5.1. WHAT IF ANALYSIS

5.2. GOAL SEEKER

5.3. DATA TABLE

5.4. SCENARIO MANAGER

5.5. SOLVER
 5.1. WHAT IF ANALYSIS
• What-If Analysis is the process of changing the values in cells to see how those changes will
affect the outcome of formulas on the worksheet.
• Three kinds of What-If Analysis tools come with Excel:
Scenarios,
Goal Seek,
Data Tables.
• Scenarios and Data tables take sets of input values and determine possible results.
A Data Table works with only one or two variables, but it can accept many different values
for those variables.
A Scenario can have multiple variables, but it can only accommodate up to 32 values.
• Goal Seek takes a result and determines possible input values that produce that result.
 5.1. WHAT IF ANALYSIS
On the Data tab, in the Forecast group, click What-If Analysis.
 5.2. GOAL SEEK
The Goal Seek feature enables you to compute a value for a worksheet input that makes
the value of a given formula match the goal you specify.
Questions answered by Goal Seek:
■ For a given price, how many glasses of lemonade does a lemonade store need to
sell per year to break even?
■ We want to pay off our mortgage in 15 years. The annual interest rate is 6 percent.
The bank told us we can afford monthly payments of $2,000. How much can we
borrow?
■ I always had trouble with story problems in high-school algebra. Can Excel make
solving story problems easier?
 5.2. GOAL SEEK

To use Goal Seek, you need to provide Excel with three pieces of
information:
■ Set Cell Specifies that the cell contains the formula that
calculates the information you’re seeking.
■ To Value Specifies the numerical value for the goal that’s
calculated in the Set Cell.
■ By Changing Cell Specifies the input cell that Excel changes
until the Set Cell calculates the goal defined in the To Value cell.
 5.2. GOAL SEEK
Example:
Greg Winston has gone bankrupt and started a lemonade stand. He has invested $400 in
lemonade equipment and sells a glass of lemonade for $4. His unit cost of producing a
cup of lemonade is $2.50. How many glasses of lemonade must Greg sell to break even?
 5.3. DATA TABLE
A data table lets you easily vary one or two inputs and perform a sensitivity
analysis.
• With a one-way data table, you can determine how changing one input changes
any number of outputs.
• With a two-way data table, you can determine how changing two inputs changes
a single output.
 5.3. DATA TABLE
Questions answered BY DATA TABLE:

■ I’m thinking of starting a store in the local mall to sell gourmet lemonade. Before
opening the store, I’m curious about how my profit, revenue, and variable costs
will depend on the price I charge and the unit cost.

■ I am going to build a new house. The amount of money I need to borrow (with a
15-year repayment period) depends on the price for which I sell my current house.
I’m also unsure about the annual interest rate I’ll receive when I close. How can I
determine how my monthly payments will depend on the amount borrowed and
the annual interest rate?
 5.3. DATA TABLE
Example:
Greg Winston has gone bankrupt and started a lemonade stand. He has invested $400 in
lemonade equipment and sells a glass of lemonade for $4. His unit cost of producing a cup
of lemonade is $2.50.
1. How is my profit vary if sold quantity is 300, 350, 400?
2. How does my profit vary if sold quantity is 300, 350, 400 and Unit cost is 4.5, 4, 3.5
respectively?
 5.3. DATA TABLE
Example:
Greg Winston has gone bankrupt and started a lemonade stand. He has invested $400 in
lemonade equipment and sells a glass of lemonade for $4. His unit cost of producing a cup
of lemonade is $2.50.
1. How is my profit vary if sold quantity is 300, 350, 400?
 5.3. DATA TABLE
Example:
Greg Winston has gone bankrupt and started a lemonade stand. He has invested $400 in
lemonade equipment and sells a glass of lemonade for $4. His unit cost of producing a cup
of lemonade is $2.50.
How does my profit vary if sold quantity is 300, 350, 400 and Price is 4.5, 4, 3.5
respectively?
 5.4. SCENARIO MANAGER
The Scenario Manager creates a beautiful report containing the inputs and the values of the output
cells for each scenario
With the Scenario Manager,
• Step 1. Define the set of input cells you want to vary.
• Step 2. Name your scenario and enter for each scenario the value of each input cell.
• Step 3. Select the output cells (also called result cells) that you want to track.
Note: You can use the Scenario Manager to perform sensitivity analysis by varying as many as 32
input cells.
 5.4. SCENARIO MANAGER
Example: Let’s assume that at the end of each of the next 40 years, you put the
same amount in your retirement fund and earn the same interest rate each year.
Show how the amount of money you will have at retirement changes in each
scenario as follows:

Scenario Period Interest Rate Annual Payment

Pessimistic 40 8% 25000
Neutral 35 9% 45000
Optimistic 30 10% 65000
 5.4. SCENARIO MANAGER
Example: Let’s assume that at the end of each of the next 40 years, you put the
same amount in your retirement fund and earn the same interest rate each year.
Show how the amount of money you will have at retirement changes in each
scenario as follows:
Period: 40
Interest rate: 5%
Annual payment: 5000
Net assets: $603,998.87 =FV(B22,B21,-B23,0,0)
 5.4. SCENARIO MANAGER
Example: Let’s assume that at the end of each of the next 40 years, you put the
same amount in your retirement fund and earn the same interest rate each year.
Show how the amount of money you will have at retirement changes in each
scenario as follows:
 5.5. SOLVER
The Microsoft Excel Solver add-in helps you answer optimization problems such as the following:
■ How can a large drug company determine the monthly product mix at its Indianapolis plant
that maximizes corporate profitability?
■ If Microsoft produces Xbox consoles at three different locations, how can it minimize the
cost of meeting demand for them?
■ What price for Xbox consoles and games will maximize Microsoft’s profit from Xbox sales?
■ Microsoft would like to undertake 20 strategic initiatives that will tie up money and skilled
programmers for the next five years. It does not have enough resources for all 20 projects;
which ones should it undertake?
■ How should I allocate my retirement portfolio among high-tech stocks, value stocks, bonds,
cash, and gold?
 5.5. SOLVER
An optimization model has three parts:
 the target cell: target cell represents the
objective or goal. You want to either
minimize or maximize the quantity in the
target cell.
 the changing cells: the worksheet cells that
you can change or adjust to optimize the
target cell
 the constraints
 Solver searches all feasible solutions and
finds the one that has the “best” target-cell
value (the largest value for maximum
optimization, the smallest for minimum
optimization). Such a solution is called an
optimal solution.
 5.5. SOLVER
Select A Solving Method list:
■ The Simplex LP engine is used to solve
linear optimization problems. a linear
optimization problem is one in which the
target cell and constraints are all created by
adding together terms of the formula
(changing cell)*(constant).
■ The GRG Nonlinear engine is used to solve
optimization problems in which the target
cell and/or some of the constraints are not
linear and are computed by using common
mathematical operations, such as multiplying
or dividing changing cells, raising changing
cells to a power, exponential or trig functions
involving changing cells
 5.5. SOLVER
Select A Solving Method list:
■ The Evolutionary Solver engine is used
when your target cell and/or constraints
contain non-smooth functions that reference
changing cells. A non-smooth function is one
whose slope abruptly changes. For example,
when x = 0, the slope of the absolute value of
x abruptly changes from -1 to 1. If your target
cell and/or constraints contain IF, SUMIF,
COUNTIF, SUMIFS, COUNTIFS, AVERAGEIF,
AVERAGEIFS, ABS, MAX or MIN functions that
reference the changing cells, then you are
using non-smooth functions and the
Evolutionary Solver engine probably has the
best shot at finding a good solution to your
optimization problem.
 5.5. SOLVER
The product-mix Solver model:
Companies often need to determine the quantity of each product to produce on
a monthly basis. In simplest form, the product-mix problem involves how to
determine the amount of each product that should be produced during a month
to maximize profits.
Product mix must usually adhere to the following constraints:
■ Product mix can’t use more resources than are available.
■ There is a limited demand for each product. You don’t want to produce
more of a product during a month than demand dictates because the excess
production is wasted.
 5.5. SOLVER
The product-mix Solver model:
■ Target cell: Maximized profit
■ Changing cells: The number of each
product produced
■ Constraints
You may have the following constraints:
• Do not use more labor or raw material
than is available.
• Do not produce more of a drug than is
in demand.
• You can’t produce a negative amount
of any product.
 5.5. SOLVER
The financial planning Solver problems.
In many of these types of problems, a quantity such as the unpaid balance on a loan or the
amount of money needed for retirement changes over time. For example, consider a situation in
which you borrow money.
Because only the noninterest portion of each monthly payment reduces the unpaid loan balance,
we know that the following equation
(Unpaid loan balance at end of period-t)
= (Unpaid loan balance at beginning of period-t) – [(Month-t payment)–(Month-t interest paid)]