1. Company Bankruptcy – Answer Sheet Name: _____________________________________
• (6 points) Exploratory analysis: Does any ratio seem to have an effect on whether a company goes bankrupt? If so, name them?
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Attach a copy of the pivot table and label it as Exhibit 1ai.
Attach a copy of the box plots and label it as Exhibit 1aii.
• (1 points) Partition the data set.
• (10 points) Use logistics regression to classify companies as bankrupt or not, using all five of the accounting ratios.
• Report the coefficient for each accounting ratio.
Coefficient for WC/TA: ______________
Coefficient for RE/TA: ______________
Coefficient for EBIT/TA: ______________
Coefficient for MVE/TA: ______________
Coefficient for S/TA: ________________
• Attach a copy of the Confusion Matrix and Error Report on validation set and label it as Exhibit 1ci.
• Attach a copy of the lift chart on validation set and label it as Exhibit 1cii.
• Does this model do a good job of classifying? Are any of the ratios insignificant in the model?
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• (8 points) Experiment with logistics regression that use only two of the accounting ratios. Which pair classifies about as well as in Part c), but with both ratios significant? For that pair,
• Attach a copy of the regression coefficients and label it as Exhibit 1di.
• Attach a copy of the Confusion Matrix and Error Report on validation set and label it as Exhibit 1dii.
• Attach a copy of the lift chart on validation set and label it as Exhibit 1diii.
2. HGA, Inc. – Answer Sheet Name:_____________________________________
a) (13 points) Expected value of the project: _____________________
Attach a copy of your decision tree and label it Exhibit 2ai.
Find the risk profile for the project and the probability Pr(net profit 0).
Pr(net profit 0): ______________________ (Show how you get this number)
Create a table to list all possible values of the project’s net profits and their corresponding probabilities and label it as Exhibit 2aii.
Would you recommend that HGA pursue the project as described in Part a)? Why or why not?
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Pr(superior design) needs to be higher than _________________ in order for HGA to change its optimal decision. Why?
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b) (12 points) Expected value of the “delay construction decision” alternative: ___________________
Maximum HGA should pay in additional costs to
secure the “delay construction decision” alternative: ___________________
Attach a copy of your decision tree and label it as Exhibit 2b.
3. Quentin’s Restaurant – Answer Sheet Name:_____________________________________
• (10 points)
i) Estimated expected profit per month? _____________
ii) Probability that Quentin incurs a loss in a given month: _____________
iii) Probability that Quentin makes more than $20,000 per month: _____________
Please attach a copy of the histogram for the monthly profit from your simulation, and label it as Exhibit 2a.
• (10 points)
i) Expected Profit for Location 1: _____________
ii) Expected Profit for Location 2: _____________
iii) Expected Profit for Location 3: _____________
The best location (in terms of expected profitability) should be _______________
• (5 points)
Is one location riskier than the others? Can you rule out any of the locations for Quentin? Based on the comparison of risk profiles as well as your analysis in part c), which location should Quentin choose?
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Please attach a copy of the overlay chart for the monthly profits from your simulations, and label it as Exhibit 2c.
4. South Grill Kitchen – Answer Sheet Name:__________________________________
• (2 points) Is it possible for SGK to meet the entire fulfillment requirement using existing manufacturing capacity in their current assignments? If so, how? If not, why not?
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Attach appropriate documentation and label it as Exhibit 4a.
• (10 points) Given the availability of the Mexican manufacturer, what is the optimal production mix? That is, how many grills of each type should they make and how many should they buy?
Make in Texas Buy from Mexico
Discount Charcoal: _______________________ _____________________
Premium Charcoal: _______________________ _____________________
Discount Gas: ___________________________ _____________________
Premium Gas: ___________________________ _____________________
Optimal cost: _______________
Attach appropriate documentation and label it Exhibit 4b.
• (3 points) What is the minimum price SGK needs to charge its customers for additional units of the Premium Charcoal grill? How many more units can they offer at this price?
Price: ________________ Number of additional units at this price: _______________________
• (2 points) If SGK is able to reassign 3000-hour labor from one department to another department, should SGK make this reassignment? If so, how? If not, why?
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Attach appropriate documentation for Part c) and d) and label it Exhibit 4c..
• (8 points) What are those types of grills that SGK should commit its Texas capacity to? How much is the total cost in this case? What is the incremental cost of making such commitment?
The types of grills committed: _____________
The corresponding total cost: _____
Incremental cost of commitment: ______________________
Attach appropriate documentation and label it as Exhibit 4d.