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    Advertising strategy for CoffeeTime based on hypothesis testing

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    Problem 1
    Laura wanted to build a multiple regression model based on advertising expenditures and coffee time's price index. Based on the selection of all normal values she obtained the following:
    1)       Multiple R = 0.738
    2)       R-square = 0.546
    By using lagged values she came up with the following:
    3)       Multiple R = 0.755
    4)       R-square = 0.570
    Explain the differences in using these different models. How could CoffeeTime further optimize this model?

    Problem 2

    Tourism is one consideration for CoffeeTime's future. A survey of 1,233 visitors to Mumbai last year revealed that 110 visited a small café during their visit. Laura claims that 10% of tourists will include a visit to a café. Use a 0.05 significance level to test her claim.
    a. Would it be wise for her to use that claim in trying to convince management to increase their advertising spending to travel agents? Explain.
    b. What additional strategy (or variation on a given strategy) would you recommend to the key decision maker in the simulation to solve the challenge given?

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    Solution Summary

    The solution helps a company CoffeeTime decide on its advertising strategy based on an analysis of a regression and then subsequent hypothesis testing.