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    Decision Trees With Excel and Treeplan

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    JP
    This document discusses how to use the TreePlan Excel add-in to construct decision trees. It describes the steps to access TreePlan, generate a new tree template, and then expand that template by adding branches to replicate a sample decision tree. Specifically, it shows how to add a third branch to the initial template by clicking on the first decision node and selecting the "Add Branch" option from the menu.

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    Decision Trees With Excel and Treeplan

    Uploaded by

    JP
    194 views2 pages
    This document discusses how to use the TreePlan Excel add-in to construct decision trees. It describes the steps to access TreePlan, generate a new tree template, and then expand that template by adding branches to replicate a sample decision tree. Specifically, it shows how to add a third branch to the initial template by clicking on the first decision node and selecting the "Add Branch" option from the menu.

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    This document discusses how to use the TreePlan Excel add-in to construct decision trees. It describes the steps to access TreePlan, generate a new tree template, and then expand that template by adding branches to replicate a sample decision tree. Specifically, it shows how to add a third branch to the initial template by clicking on the first decision node and selecting the "Add Branch" option from the menu.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    194 views2 pages

    Decision Trees With Excel and Treeplan

    Uploaded by

    JP
    This document discusses how to use the TreePlan Excel add-in to construct decision trees. It describes the steps to access TreePlan, generate a new tree template, and then expand that template by adding branches to replicate a sample decision tree. Specifically, it shows how to add a third branch to the initial template by clicking on the first decision node and selecting the "Add Branch" option from the menu.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 2

    branches have been created. The cells next to node 5 are initially empty, and we enter “0.

    6” into cell F5
    and “50,000” in cell F7. When we enter “0.6” in cell F5, “0.4” automatically appears in cell F9. We
    repeat this process for the next 4 new event branches to re-create the decision tree in Figure 12.3. Notice
    that the maximum expected value of $44,000 is shown in cell A15, just above node 1, and in cell D15,
    above node 3, indicating that the office building is the best decision.
    Decision Trees with Excel and TreePlan (www.treeplan.com)
    TreePlan is an Excel add-in program developed by Michael Middleton that can be obtained from Decision
    Tool Works to construct and solve decision trees in an Excel spreadsheet format. Although Excel has the
    graphical and computational capability to develop decision trees, it is a difficult and slow process.
    TreePlan is basically a decision tree template that greatly simplifies the process of setting up a decision
    tree in Excel.
    The first step in using TreePlan is to gain access to it. The best way to go about this is to copy the
    TreePlan add-in file, TreePlan.xla, from the companion Web site accompanying this text onto your hard
    drive and then add it to the “Add-Ins” menu that you access at the top of your spreadsheet screen. Once
    you have added TreePlan to the “Add-Ins” menu, you can invoke it by clicking on the “Decision
    Trees” menu item.
    We will demonstrate how to use TreePlan with our real estate investment example shown in Figure 12.3.
    The first step in using TreePlan is to generate a new tree on which to begin work. Exhibit 12.11 shows a
    new tree that we generated by invoking the “Add-ins” menu and clicking on “Decision Trees.” This
    results in a menu from which we click on “New Tree,” which creates the decision tree shown in Exhibit
    12.11.
    Exhibit 12.11
    The decision tree in Exhibit 12.11 uses the normal nodal convention we used in creating the decision trees
    in Figures 12.2 and 12.3—squares for decision nodes and circles for probability nodes (which TreePlan
    calls event nodes). However, this decision tree is only a starting point or template that we need to expand
    to replicate our example decision tree in Figure 12.3. In Figure 12.3, three branches emanate from the first
    decision node, reflecting the three investment decisions in our example. To create a third branch using
    TreePlan, click on the decision node in cell B5 in Exhibit 12.11 and then click on “Decision Tree”. A
    window will appear, with several options, including “Add Branch”. Select this menu item and click on
    “OK.” This will create a third branch on our decision tree, as shown in Exhibit 12.12.

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