Regression Analysis By Managers

Regression Analysis By Managers

Instructions/Descriptions

Regression Analysis By Managers

A finance manager employed by an automobile dealership believes that the number of cars sold in his local market can be predicted by the interest rate charged for a loan.

• The finance manager performed a regression analysis of the number of cars sold and interest rates using the sample of data above. Shown below is a portion of the regression output.

1. Are there factors other than interest rate charged for a loan that the finance manager should consider in predicting future car sales?
2. Is interest rate charged for a loan the most important factor to be considered in predicting future car sales? Explain your reasoning.The dealership’s vice-president of marketing has requested a sales forecast at the prevailing interest rate of 7%.
3. As finance manager, what reasons would you convey to the vice-president in recommending this forecasting model?
4. Is the prediction of car sales at 7% a reflection of the current downturn in the economy? How might this impact the dealership’s business?

A finance manager employed by an automobile dealership

believes

that the number of cars sold in his local market can be

predicted by the interest rate charged for a loan.

Interest Rate (%)

Number of Cars Sold (100s)

3

10

5

7

6

5

8

2

The finance manager performed a regression analysis of the

number of cars sold and interest rates using the sample of data

above. Shown below is a portion of the regression output.

Regression Statistics

Multiple

R

0.998868

R

2

0.997738

Coefficient

Intercept

14.88462

Interest Rate

–

1.61538

1.

Are there factors other than interest rate charged for a

loan that the finance manager should consider in

predicting future car sales?

2.

Is interest rate charged for a loan the most important?

factor to be considered in predicting future car sales?

Explain your reasoning.The dealership’s vice

–

president of marketing has requested a sales forecast

at the prevailing interest rate of 7%.

3.

As fina

nce manager, what reasons would you convey

to the vice

–

president in recommending this forecasting

model?

4.

Is the prediction of car sales at 7% a reflection of the

current downturn in the economy? How might this

impact the dealership’s business?

• A finance manager employed by an automobile dealership

believes that the number of cars sold in his local market can be

predicted by the interest rate charged for a loan.

Interest Rate (%) Number of Cars Sold (100s)

3 10

5 7

6 5

8 2

The finance manager performed a regression analysis of the

number of cars sold and interest rates using the sample of data

above. Shown below is a portion of the regression output.

Regression Statistics

Multiple R 0.998868

R

2

0.997738

Coefficient

Intercept 14.88462

Interest Rate -1.61538

1. Are there factors other than interest rate charged for a

loan that the finance manager should consider in

predicting future car sales?

2. Is interest rate charged for a loan the most important

factor to be considered in predicting future car sales?

Explain your reasoning.The dealership’s vice-

president of marketing has requested a sales forecast

at the prevailing interest rate of 7%.

3. As finance manager, what reasons would you convey

to the vice-president in recommending this forecasting

model?

4. Is the prediction of car sales at 7% a reflection of the

current downturn in the economy? How might this

impact the dealership’s business?

Regression Analysis By Managers

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