Question

My Not Companies in the U.S. car rental market vary greatly in terms of the size of the weet, the number of locations, and annual revenue. In 2011, Hertz had 120.000 cars in service and annual revenue of approximately $4.2 billion. Suppose the following data show the number of cars in service (1,000) and the annual revenue (5 millions) for six smaller car rental companies. Company (1,000) Revenue (millions) Company A Company 10.0 Company Company E Company (a) Develop a scatter angram ith the number of cars in service as the independent variable. Annual Revenue millions) Annual Revenue (5 millions) Annual Revenue 5 millions) 12 14 0 2 12 14 0 2 12 14 4 6 8 10 Cars in Service (1.000) 4 6 8 10 Cars in Service (1.000) 4 6 8 10 Cars in Service (1.000) 0 E ORI D ome $23 to Prtson presen, Home End o Poup Pgon on

Answer 1

(a)

Independent variable (x): cars

Dependent variable (Y): revenue

Following is the scatter plot:

160 1 140 120 100 2468 10 12 14

(b)

First option is correct.

(c)

Following table shows the calculations:

	X	Y	X^2	Y^2	XY
	11.5	120	132.25	14400	1380
	10	135	100	18225	1350
	9	102	81	10404	918
	5.5	39	30.25	1521	214.5
	4.2	40	17.64	1600	168
	3.3	32	10.89	1024	105.6
Total	43.5	468	372.03	47174	4136.1

Sample size: n= 6 From table we have: -512_(2x)" 1 = 372.03- ((43.5)^2/6) = 56.655 -= 47174- ((468)^2/6) = 10670 1 . SP=Sx = xy- = 4136.1- ((468 * 43.5) /6) = 743.1

The slope is: b. XT = 743.1/56.655 So b = 13.116 The intercept is: bo = }(27-4Ex) = (468 - (13.116 * 43.5))/6 be =-17.091 The regression equation is: y' = 13.116 * X -17.091

(d)

The slope is 13.116. It shows that for additional 1000 car placed in service, revenue is increased by $13.116 * 1000000 = $13116000. That is for each additional car revenue is increased by $13116.

Answer: $13116

(e)

We need to predict value for X = 11. The predicted value y is

The predicted value for x = 11 is : y' = -17.091 + 13.116 * 11 = 127.185

Answer: $127 million