Car Plus Co. believes local payroll and local sales of import cars for the year can be considerably associated with Car Plus's yearly sales. The management looked into their stored data and summarized what is available in Table 4 below (the 10 years in the table are not consecutive years). Associate method (i.e., linear regression) is the forecasting method the management has decided to use. Answer the questions Q1 and Q2 below.

Q1: Given the estimated local sales of import cars, $18 million, and estimated local payroll, $3.8 billion, next year, what is the forecasted sales for Car Plus for next year? You have to show your analysis to earn points.

Q2: The manager, Alan, suggested the annual average interest rate (Table 5) be taken into consideration along with local payroll and local sales of import cars for the year, when forecasting Car Plus's yearly sales. Along with the information indicated in Q1, Alan predicted the average interest rate next year is 5.6%. Should the interest rate be included to forecast Car Plus's next year's sales? Provide the quantitative/statistical reasoning behind your answer

 

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Table 4 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Table 5 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Local sales of import cars (in million) Interest rate (%) 8.0 11.0 12.0 15.0 13.4 17.0 18.4 21.6 20.5 16.0 3.0 4.2 6.0 3.0 5.0 4.8 3.0 6.0 4.0 2.0 Local payroll (in billion) 2.0 3.5 4.0 4.5 4.2 2.7 3.5 3.6 3.2 2.2 Car Plus's yearly sales (in thousand) 94 135 188 225 175 196 260 318 270 195 Table 4 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Table 5 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Local sales of import cars (in million) Interest rate (%) 8.0 11.0 12.0 15.0 13.4 17.0 18.4 21.6 20.5 16.0 3.0 4.2 6.0 3.0 5.0 4.8 3.0 6.0 4.0 2.0 Local payroll (in billion) 2.0 3.5 4.0 4.5 4.2 2.7 3.5 3.6 3.2 2.2 Car Plus's yearly sales (in thousand) 94 135 188 225 175 196 260 318 270 195

Answer rating: 100% (QA)

Solution Q1 Given the estimated local sales of import cars 18 million and estimated local payroll 38 ... View the full answer