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The Tons of Fun Hobby Company general manager knows she can use sales and payroll data to do an estimated regression equation and forecast sales for next year. Her finance director gives her the following data table.

Define the regression equation she is able to deduce from the table, and calculate her year six sales forecast if Year 6 payroll is $3.1 million

5.

Consider the following decision table, which Sally Smith has developed for her firm, Production Enterprises.

Which decision alternative maximizes the expected value of the payoff?

6.

The receipts for ZXY’s proposed Project A are estimated to be $6,000 in the first year; $4,500 in the second, and $1,500 in the third. Another project on the ZXY docket, Project B, would bring in $4,000 a year over 3 years. Using an interest rate of 6% for both Projects A and B, calculate the net present value (NPV) of these expected receipts for Project A (15 points), and given that forgoing Project A would result in the equivalent of an inflow of $4,000 per year, what should the firm do: go with Project A or avoid the cost and/or look for a more profitable project