How to Create a Decision Tree in Excel 2007
A decision tree maps out a number of decisions and the possible outcomes of each decision. It includes the probabilities of each outcome and estimated value of each decision. A decision tree helps a user identify possible alternatives and weigh each possible outcome to reach an optimal solution for the problem at hand. Learn how to create a decision tree using the horizontal labeled hierarchy chart in Microsoft Excel.
Things You'll Need
- Microsoft Excel 2007
Open a new workbook in Microsoft Excel. Go to the "Insert" tab and click the "SmartArt" button. A window titled "Choose a SmartArt Graphic" will appear. Click the "Hierarchy" category and choose "Horizontal Labeled Hierarchy" design. Click "OK."
Type the name of the decision next to the first bullet point in the window that says "Type your text here." Type something like "Investment," if you are making an investment decision.
Type the names of each option in the indented bullet points under the decision bullet. For example, you are investing in a small retail store and have the option of either working there yourself or hiring an employee to run the business. You would enter "Don't Hire Employee" and "Hire Employee" under "Investment." Evaluate each option and determine whether a result is achieved, if there is uncertainty, or if another decision needs to be made.
Insert boxes wherever there is another decision to be made and circles for uncertainties. If there is a result, nothing needs to be done. Boxes can be added by pressing "Enter" and "Tab" after the bullet point where you would like to add a box. To change the shape to a circle, for example, right click on the shape, and select "Change Shape." Select a circle.
Enter probabilities in the closest cell where circles and lines join. The probabilities represent the percentage you expect to occur. Enter estimated values such as dollar values in the closest cell where boxes and lines are joined. These represent the estimated value of the decision if it is taken.