Use the churn data set at the book series website for the following exercises. Make sure that the correlated variables have been accounted for.

Perform a cost/benefit analysis for the default CART model from exercise 1 as follows. Assign a cost or benefit in dollar terms for each combination of false and true positives and negatives, similar to Table 14.4. Then, using the contingency table, find the overall anticipated cost.

Outcome Classification Actual Cost Rationale Value True negative True positive False negative False positive 50,000 >50,000 50,000 >50,000 50,000 $300 >50,000 $0 Anticipated average interest revenue from loans No money gained or lost 50,000 $500 Cost of loan default averaged over all loans to 50,000 group