Ten Basic Steps...

Win O R S, Capital Budgeting with Zero-One Optimization…

Step One: Start Win O R S.   Additionally, open a Microsoft Word document. If this is the first Word document for this assignment, then start Word by use of the Windows Start menu. If you have previously created a Word document then you must open the document by using the following Win O R S menu tree:. Solution.. Open M-S Word document…

Step Two. Select the menu sequence:. Applications. Finance Methods. Capital Budgeting. Load Template.

Step Three.  The capital budgeting template is visible. This template is used to create hypothetical cash flows for twenty projects of differing expected life.  Each template differs in its presentation of cash flows owing to the use of the random number generator.

Step Four. Review the spreadsheet.  Note that the V-type of, E, is used to indicate expense, or cash outflow. The V-type of, R, is used to indicate revenue, or cash inflow. Row four displays the discount rates for each type of flow. Row five displays the time period zero purchase price, and the end-of-period salvage value, respectively.   See the full help file for detailed descriptions of each section.

Step Five. Rank the budget. Choose the menu sequence:. Applications. Finance Methods. Capital Budgeting. Rank Budget. The Rank Budget Dialog screen appears next.  Accept all defaults.  Click on O-K when ready.  The ranked solution is inserted on row thirty, which is the default insertion point. Review the analytical sections:. Ranking Criterion.  Project Rankings, a summary. And, cumulative benefits.

Step Six.  View diagnostic charts.  Choose the menu sequence:. Charts.  Diagnostics.  Finance Methods. Capital Budgeting.

Step Seven:  Solve for the optimal capital budget.  Choose the menu sequence:.  Applications. Finance Methods. Capital Budgeting.  Optimal Budget. The tab switches to the Zero-One tab.  The canonical form of the constrained optimization problem appears on this tab.  The format is as follows:  The objective function is presented on row four.  A required separator row is produced along row five. The constraint matrix begins on row six. For visual convenience, a budget constraint is automatically inserted on row six.  The right hand side of this constraint is set to no more than ninety-percent of the total expenditures.  Click O-K when ready.

Step Eight:  The Current Solutions File list appears next.  Click on the plus sign associated with Finance Methods. Click on Capital Budgeting Optimal Solution. The solution to the constrained optimization problem is merged into the next available tab.

Step Nine: If done, go to step ten. Otherwise, additional policy constraints may be appended.  Click on the Zero-One tab.  Choose the menu sequence:. Applications. Finance Methods. Capital Budgeting. Policy Constraints.  Use the policy constraint wizard to add more constraints. NOTE:  all default ranges are adjusted automatically when using the policy constraint wizard. This is not true if you add constraints manually.  Go to step Eight.

Step Ten:  Save, edit, and close all documents and applications.

This completes the ten basic steps for Capital Budgeting with zero-one optimization…

[WinORS Basic Steps] [Finance] [Capital Budgeting] [Bank Analysis] [Industrial Statements] [Equity Portfolio] [Efficient Set] [Option Price Simulation] [Statistics] [Learning] [Math Prog]

 NKD-Group, Inc. 1998 - 2004