Explanation of Simulation

Brigham & Ehrhardt Explanation of Simulation.txt

Explanation of Simulation

Before you open the Excel file for simulation analysis, Ch 11 Tool Kit Simulation.xls, you must first install an Excel Add-In. If you try to use the file Ch 11 Tool Kit Simulation.xls before installing this Add-In you will get errors, unexpected dialogue boxes and the simulation will not function. This Add-In provides a set of special functions that generate random variables for the simulation. You can use these new functions exactly like all the other functions that come with Excel. You can even use the Function Wizard to input the formula for the function automatically. The Add-In also provides a simple Tool (which shows up on the Excel Tools menu) for doing the simulation.

We have included this Add-In file on the textbook’s CD-ROM and web site. The file is Simtools.xla. The file type, xla, indicates that this file is an Add-In and not a regular worksheet. This Add-In was developed by Professor Roger Myerson at Northwestern University. The next paragraph explains how to install this Add-In, but if you would like to see a more detailed explanation, you can go to Professor Myerson’s web site:

http://www.kellogg.nwu.edu/faculty/myerson/ftp/addins.htm.
Installing Simtools.xla

The installation has two steps. The first step is to put a copy of Simtools.xla in Excel’s “library” of special functions. Do this before you open the file FM11 Ch 11 Tool Kit Simulation.xls. This library is a folder, normally located at c:\Program Files\Microsoft Office\Office\Library for Office 2000. For Office XP, you may need to put the file in c:\Program Files\Microsoft Office\Office10\Library. Your Library folder may be at a different location, depending on how you installed Excel.

After you complete the first step of putting a copy of Simtools.xla in the Library folder, it is now available to Excel. The second step is to tell Excel to use the Add-In. You only have to do this once, and the Add-In will be available any time you use Excel on your computer. To complete this step, open a blank worksheet in Excel and look at your menu bar. Click “Tools” and then click “Add-Ins…”. (Note: Excel for Office 2000 will open a new dialog box fairly quickly, but it may take up to 30 seconds with older versions.) See the diagram below.


This will open a dialog box, similar to the one shown below. Check the box denoted Simulation Tools, and then click OK.


At this point, Simtools should now be installed and ready for use. You can quickly verify this by clicking the Function Wizard (shown as f_x on the Excel menu bar), and then selecting Statistical from the Function category. You should see some new functions, such as CE and CEPR. These are some of the functions that Simtools added.

If you close this box and click on “Tools” in the Excel menu bar, you should also see a new item on the Tools submenu, called SimTools.

If you have installed SimTools correctly, then you are now ready to open the Excel file Ch 11 Tool Kit Simulation.xls and perform a simulation.

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