Using Triangular Distribution for Business and Finance Simulations in Excel

We discuss the properties and usefulness of the triangular distribution, and argue that it is a suitable distribution to employ in many simulation situations. The triangular distribution function is not provided in Microsoft Excel. We motivate the benefits of creating a user-defined function in Exce...

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Bibliographic Details
Published in:Journal of financial education 2016-12, Vol.42 (3-4), p.313-336
Main Authors: Fairchild, Keith Wm, Misra, Lalatendu, Shi, Yilun
Format: Article
Language:English
Subjects:
Cash flow
Cogs
Cost estimates
Financial risk
Gaussian distributions
Histograms
Income statements
Random variables
SPECIAL TOPICS
Spreadsheets
Standard deviation
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Summary:We discuss the properties and usefulness of the triangular distribution, and argue that it is a suitable distribution to employ in many simulation situations. The triangular distribution function is not provided in Microsoft Excel. We motivate the benefits of creating a user-defined function in Excel and provide simple coding to assist the reader. Next, we show how to create and implement a short VBA macro code to help generate multiple simulation runs. We present a number of examples to illustrate the usefulness of the triangular distribution in project analysis and in the analysis of rival entry on the cash flows and the value of the project and compare the usefulness of the triangular distribution relative to the uniform and the normal distributions.
ISSN:0093-3961
2332-421X