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Random Motors Project Submission: Name - Rohith Muralidharan

The document discusses a regression analysis performed to predict sales of two car models, Rocinante36 and Marengo32, based on price, mileage, and top speed. Key findings include: 1) Regression equations were developed for each model with predictors of price, mileage, and top speed. Predicted sales were 227897 units for Rocinante36 and 25265 units for Marengo32. 2) Based on the predictions, the overall predicted profit for Rocinante36 was higher, so this would be the model for investment. 3) Rebuilding the regression with only significant predictors led to a slight increase in the adjusted R-square values, improving the model fit.

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110 views

Random Motors Project Submission: Name - Rohith Muralidharan

The document discusses a regression analysis performed to predict sales of two car models, Rocinante36 and Marengo32, based on price, mileage, and top speed. Key findings include: 1) Regression equations were developed for each model with predictors of price, mileage, and top speed. Predicted sales were 227897 units for Rocinante36 and 25265 units for Marengo32. 2) Based on the predictions, the overall predicted profit for Rocinante36 was higher, so this would be the model for investment. 3) Rebuilding the regression with only significant predictors led to a slight increase in the adjusted R-square values, improving the model fit.

Uploaded by

Rohith muralidharan
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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Random Motors Project

Submission
Name - Rohith Muralidharan
Q-1a) Formulate the null hypotheses to check whether the new models are
performing as per the desired design specifications.

For Rocinante36: For Marengo32:

Mileage HO : car mileage =22kmpl Mileage HO : car Mileage = 15 kmpl

Top speed HO : top speed = 140kmph Top speed HO : Top Speed = 210kmph
Q-1b) Formulate the alternate hypotheses to check whether the new models
are performing as per the desired design specifications.

For Rocinante36: For Marengo32:

Mileage H1 : Car Mileage not = Mileage H1 : car mileage not =


22kmpl 15kmpl

Top speed H1 : top speed not = Top speed H1 : top speed not =
140kmph 210kmph
Q-2) In order to comment on whether the design specifications are being
matched or not, perform relevant hypothesis tests and calculate the p-value for
each. What will you conclude? Assume you are performing the tests at 95%
confidence level.
For Rocinante36: Conclusion

p-value for mileage = 0.082 ❖ Assuming Significance Level of 0.05 at


95% Confidence Interval, it can be stated that in all the 4
p-value for top speed = 0.432
scenarios for both the models the p-value > alpha.

For Marengo32: ❖ we will fail to reject the Null hypothesis in all the 4
scenarios for both the models.
p-value for mileage = 0.134
❖ we will fail to challenge the
p-value for top speed = 0.373 company’s promised specifications
Q-3) You have learnt about the possible errors that might result from the
hypothesis tests. What type of error is more expensive for Random motors
based on the hypothesis they are testing? Why? Assume that you need to
refund all your customers if your cars deviate from specifications.
The type of error which is more Reason:
expensive: ❖ In Type 2 error, when we fail to reject the null
hypothesis and is false which means not provide the
❖ Type 2 error is more expensive. promised specifications, then company will suffer a huge
negative publicity which in turn will affect its brand value
and also be forced to refund to all their customers.
Q-4) Develop a regression equation for each model at 95 percent confidence
level. From the regression equation predict the sales of the two models.
Develop the regression equation for the Develop the regression equation for the
Rocinante models and Predict the number Marengo models and Predict the number of
of unit sales of Rocinante36 model? unit sales of Marengo32 model?

Regression coefficients Regression coefficients

Price: -0.795026441 Price: - 13.44764889

Mileage: 8.306331092 Mileage: 0.041301187

Top speed: -0.018572564 Top speed: 0.220

Equation: Predicted sales (Y) =50.72312718 + (- Equation: Predicted sales (Y) = -13.44764889+ (-
0.795026441*Price) +(8.306331092*Mileage) 0.186728172* Price) +(0.220801682*Speed)
Predicted Sales(in units): 227897 Predicted Sales(in units): 25265
Q-5) Based on sales prediction, what is the overall predicted profit for
Rocinante36 model and Marengo32 model ?

Overall predicted profit

Rocinante36 Model: 227897

Marengo32 Model: 202118.7942


Q-6) As a CEO, you wish to invest only in the model which is predicted to be
more profitable. Which model among Rocinante36 and Marengo32 will you
invest in?

Which model you will invest in?

On the basis of predicted profit of both the models we can come to a conclusion that Rocinante36 is the one to make an
investment into as this model is going to bring more profit compared to Marengo32.
Q-7) Now you must have derived the regression equation for both models, Rocinante and
Marengo. Now if you increase the price of Rocinante36 and Marengo32 by 1 lac rupees
each, which car will have a higher impact on the sales due to increase in price? Give proper
logic for your answer. You can consider that all other specifications such as mileage and top
speed remain the same for both models.

Which car is most affected by a price increase? Why?

Due to the price hike Rocinante 36 gets impact on the sales compared to Marengo.
The price coefficient is higher in Rocinante 36 impact is on the higher side.
Q-8) After developing the regression equation for both models (Rocinante and Marengo), if you
analyse the p values for coefficients in the regression results, you will notice that some of the
regression variables (top speed, mileage and price) are insignificant. Remove the insignificant
regression variables from your selection and rebuild the regression model using only significant
variables. Compare the Adjusted R square value for the new and old regression model. Do you
notice any change in Adjusted R square value? If yes, explain the reason for the change.

Is there a change on Adjusted R square Value? If so, Why?

There is a slight increase in the Adjusted R Square values for both the models.
When taking only significant independent variables in the new regression model it’s improving the Adjusted R Square value because
the Adjusted R square value increases when the considered independent variable is improving the model.

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