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# Hypothesis Testing

The purchase of a coin-operated laundry is being considered by a potential entrepreneur. The present owner claims that over the past 5 years the average daily revenue has been \$675 with a standard deviation of \$75. A sample of 30 selected days reveals a daily average revenue of \$625.

a. State the null and alternative hypothesis
b. Is there evidence that the claim of the present owner is not valid? (use a .01 level of significance.)
c. What will your answers be in (b) if the standard deviation is now \$100?
d. What will your answer be in (b) if the sample mean is \$650?

#### Solution Preview

The purchase of a coin-operated laundry is being considered by a potential entrepreneur. The present owner claims that over the past 5 years the average daily revenue has been \$675 with a standard deviation of \$75. A sample of 30 selected days reveals a daily average revenue of \$625.

a. State the null and alternative hypothesis

The alternative hypothesis is what we want to test (that the current owner is wrong about the average daily revenue). The null hypothesis is the opposite of this (that the owner is correct).

Null hypothesis (H0): The average daily revenue is \$675 (&#956; = 675).
Alternative hypothesis (Ha): The average ...

\$2.19