Your firm is considering a capital budgeting proposal to manufacture keypads for tablet devices. The project is anticipated to have a useful life of 10 years. You estimate that revenues associated with this project will be $15M per year.
January 5, 2018
Assume that there are no taxes or transaction costs, and that the Modigliani-Miller propositions are true. Bluth Banana Corp (BBC).
January 5, 2018

Assume a population standard deviation of R25K and that the investment amounts are approximately normally distributed. Formulate the null and alternate hypothesis for this test situation. (2)

The Investment manager of a large investment company believes that the investors invest on average, R85K on any one occasion. To test this belief, the manager commissioned a study, which found that, from a random sample of 132 investors, the average investment was R80.5K. Assume a population standard deviation of R25K and that the investment amounts are approximately normally distributed.
a) Formulate the null and alternate hypothesis for this test situation. (2)
b) Which test statistic (z or t) is appropriate for this test? Why? (2)
c) Conduct a hypothesis test for a single mean at the 5% significance level to support or refute the
manager’s belief. (6)
d) What management conclusion would be drawn from the findings? (1)

 

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