Problem

Pricing Communications Nodes. The cost of adding a new communications node at a location n...

Pricing Communications Nodes. The cost of adding a new communications node at a location not currently included on the network was of concern to a major Fort Worth manufacturing company. To try to predict the price of new communications nodes, data were obtained on a sample of existing nodes. The installation cost (COST) and the number of ports (NUMPORTS) available for access in each existing node were readily available. Data on two additional characteristics of communications nodes were also obtained: bandwidth (BANDWIDTH) and port speed (PORTS PEED). These data are shown in Table 4.6 and are available on the CD in a file named COMNODE4.

The network administrator wants to develop a method of estimating the cost of new nodes in a quick and fairly accurate manner. You have been asked to help in this project. Using the data available, develop an equation to help in the pricing of new communications nodes. Justify your choice of equation.

Start with all three explanatory variables in the equation. Do you encounter any problems when you estimate this equation? Request variance inflation factors for the variables included in the regression. What do the VIFs tell you?

TABLE 4.6: Data for Communications Nodes Exercise

Cost

Number of Ports

Bandwidth

Port Speed

52,388

68

58

653

51,761

52

179

499

50,221

44

123

422

36,095

32

38

307

27,500

16

29

154

57,088

56

141

538

54,475

56

141

538

33,969

28

48

269

31,309

24

29

230

23,444

24

10

230

24,269

12

56

115

53,479

52

131

499

33,543

20

38

192

33,056

24

29

230

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Solutions For Problems in Chapter 4