In: Statistics and Probability
Answer all questions below. It is a whole question with multiple parts.
Profit Forecasting: A company is interested in
predicting profit for a number of projects based on two explanatory
variables: a measure of risk assigned at the outset of the project
(x1 = RISK) and the
expenditure on research and development for the project
(x2 = RD). Data on the three
variables PROFIT, RISK, and RD are available in the worksheet
entitled RD5. PROFIT is measured
in thousands of dollars and RD is
measured in hundreds of dollars. Use the data to
fit two separate regression models.
For the first model (Linear Model AKA First Order Model), regress
PROFIT on the two explanatory variables RISK and RD. (Hint:
"Regress PROFIT on x" implies that PROFIT is the
y variable and x is the explanatory
variable.)
PROFIT | RISK | RD |
396 | 8.5 | 132.58 |
130 | 7.5 | 81.928 |
508 | 10 | 145.992 |
172 | 8 | 90.02 |
256 | 7 | 114.408 |
32 | 7.5 | 53.704 |
102 | 7 | 76.244 |
102 | 8 | 71.68 |
536 | 9.5 | 151.592 |
102 | 7.5 | 74.816 |
214 | 6 | 108.752 |
200 | 8.5 | 92.372 |
158 | 7 | 92.26 |
32 | 6.5 | 60.732 |
116 | 7.5 | 78.12 |
120 | 5.5 | 90 |
270 | 9 | 105.532 |
270 | 8 | 111.832 |
Use the Second Order Model to answer
ALL of the questions below. Also,
be sure to compute these values based on the UNROUNDED
values in EXCEL.
e) Predict the profit for a project with a risk of 6.0 and a
research and development expenditure of $5,500. (Enter your answers
to two decimal places.)
f) Parts f) and h) require the use of partial
differentiation. How quickly is the average profit
increasing with respect to risk for a project with
a risk of 6.0 and a research and development expenditure of $5,500?
(Enter your answer to two decimal places.)
How quickly is the average profit increasing with respect
to research and development expenditure for a project with
a risk of 6.0 and a research and development expenditure of $5,500?
(Enter your answer to two decimal places.)
g) Predict the profit for a project with a risk of 8.5 and a
research and development expenditure of $9,500. (Enter your answers
to two decimal places.)
h) How quickly is the average profit increasing with
respect to risk for a project with a risk of 8.5 and a
research and development expenditure of $9,500? (Enter your answer
to two decimal places.)
How quickly is the average profit increasing with respect
to research and development expenditure for a project with
a risk of 8.5 and a research and development expenditure of $9,500?
(Enter your answer to two decimal places.)