Highlights
Assignment: A spreadsheet-based decision model
Background - This is an individual assignment. The modelling work should be submitted online in the Assignment Folder as a single MS Excel file with the required information in clearly labelled separate worksheets. In addition, you are also required to submit a report that summarises your models and results. Your report must be in MS Word file format. Any other file format, such as pdf, is NOT acceptable and will not be marked. In summary, two files should be submitted – one MS Excel spreadsheet and one MS Word file.
The assignment has six sections:
Model description, conceptual model, and assumptions
Spreadsheet-based decision model
Scenario analysis
Spreadsheet-based stochastic decision model including justification for the choice of distribution 5. Simulated distribution for each output and a risk analysis
Report.
Graduate Learning Outcome (GLO) Unit Learning Outcome (ULO)
GLO1: Discipline-specific knowledge and capabilities: appropriate to the level of studyrelated to a discipline or profession.
GLO3: Digital literacy: using technologies to find,use and disseminate information
GLO4: Critical thinking: evaluating information using critical and analytical thinking and judgment
ULO1: Apply decision models optimisation techniques toconceptualise and represent a business scenario
ULO2: Apply optimisation software tools to find optimaldecisions for a given business scenario
ULO3: Interpret and analyse the results; investigate the assumptions of the decision model
Assignment Details:
You are required to develop a spreadsheet-based decision model that can be used to investigate and explore decisions and risks relating to taking a business loan (e.g. for investment) for a small-to-medium sized business. The model needs to be generic enough to enable the decision maker to explore the size of the loan that is viable/manageable within different scenarios of income, cost, expenses, loan amount, deposit made on the loan, repayment amount, other financial commitments, the amount of interest paid etc. and understand the risks associated with meeting the loan commitments.
The decision model must be realistic and easy to use. The level of complexity modelled, for example the choice of deterministic vs. stochastic inputs, input distributions, etc., is left to your discretion. However, the model must enable the user to input the following business cost/expenses and loan details/options.
Utilities (Electricity& Gas &Water)
Telephone/mobile
Insurance
Maintenance
Paid salaries
Other
No data is provided. You are required to create a fictitious business and demonstrate the utility of the decision model using real data where available (e.g. interest rates) and create data where it is not (e.g. income, business expenses).
Note that Net Profit = Sales revenue – Total variable costs – Fixed costs – Overheads.
The minimum requirements of the decision model are:
Ability to enter loan details, income, costs, and expenses to explore decision options relating to the loan amount and repayments to calculate outputs such as total interest paid and duration of loan.
Ability to understand the impact of variation to the loan interest rate, income, costs, and expenses over the duration of the loan.
Stochastic treatment of some of the inputs to explore resulting simulated output and summarize risks.
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