A Brief DPL Tutorial

♦ Click OK
In the Decision Tree Pane:
♦ Click anywhere inside the pane to make this the active pane
♦ Click on the “Year 2”
node with the right side of the mouse.
♦ From the menu that appears choose “Detach”. This will separate
this node from
the rest of the tree.
♦ Click on “Node / Add Chance” in the pull down menu.
♦ Choose “Year1 Price”
♦ Attach this chance node to the upper branch of the “Drill Decision” node. You
may want to move nodes around before doing this in order
to make room for this
additional node.
♦ Reattach the “Year 2 Price” node to the end of the “Year 1 Price” node.
♦ Edit “Year 2 Price” by double clicking on the node.
♦ Go to the Data menu and insert the new probabilities and values for each of the
three branches. Ex: The “Low” outcome branch will have a probability of
0.25
and a value of “Year1 Price – 6”, as this outcome has the effect of lowering the
expected oil price, the “Nominal” branch will be simply “Year1 Price”, and the
“High” branch will be “Year1 Price + 4”.
We must
now adjust our formulas to reflect this new situation:
♦ Click on the “Yes” branch of the “Drill Decision”
node. The Get/Pay menu pops
up.
♦ Change the formula there to: -2000 (this leaves only the investment). Click OK
♦ Click on any branch of the “Year1 Price” node. The Get/Pay menu pops up.
♦ Input
the Year 1 cash flow formula: 500*(Year1_Price–13). You can use the
Variable Icon button in the Get/Pay menu to input the Year1 Price variable
instead of typing it in.
At this point, your screen should
look like Figure 9:
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