How to use Solver in Excel 2007
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If not installed, click on the 'office button', then 'Excel Options' at the bottom of the window, next click on 'Add-ins' and follow the instructions to add 'Solver'.
Solver in Excel is a What-if analysis tool that finds the optimal value of a target cell by changing values in cells used to calculate the target cell.
Let's see how we can use the solver tool to solve a practical business problem like running a cybercafe. We take a loan from the bank and purchase computers, furniture and Uninterrupted Power Supply equipment (UPS). Using the PMT function we can calculate the amount of monthly instalments we have to repay to our bank.
Our regular monthly expenses include salaries, electricity, maintenance, internet charges to our ISP, telephone costs, advertisement costs and rent. Our rented accomadation can easily accomadate 24 computers but we start with 12.
Based on our costs we can calculate the minimum amount we should charge the customer to break-even. That is, at this point in our business we neither make a profit nor a loss.
Now using the solver and a recce of what other cybercafes are charging per hour we can do a what if analysis.
Interesting Books on Solver for reference
How to use Solver to optimize your interest earnings
Using Solver for financial planning
Sensitivity analysis using the scenario manager in Solver
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