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Schmeckt Gut plans the market launch for the Schmeckt Besser energy bar in Atollia within the next couple of months.
The Research Department of Schmeckt Gut has conducted a market analysis of Atollia. The results are provided for you in the EXCEL file in Module 4 Assessment.
Based on international sources, the Research Department is comfortable in making the following predictions on average incomes in Atollia, the inflation rate in Atolia and tariff rates on imports from Industria:
- Average Incomes: could increase by 1% or 3% or 5% or 7%
- Inflation rate: could increase by 2% or 3% or 4% or 5%
- Tariffs on imports from Industria: could increase by 7.5% or 10% or 5% or there may be no tariffs, in which case there would be free trade between Industria and Atolia.
The Board of Schmeckt Gut is interested in obtaining information on how the expected annual demand for the Besser energy bars would be under the Best Case Scenario, Worst Case Scenario or Middle (Base) Case scenario. To give you an understanding of what the scenarios mean, consider the best case scenario. The “Best Case Scenario” would occur when the annual demand for our energy bars is at its highest. The question to ask is: “ Which income, inflation and tariff predictions would produce the highest possible demand?“ I am sure with this illustration you can decipher what the “Worst case scenario” stands for. The Base or Middle Case scenario is when normal or average conditions occur.
Your task is to write a 3,000 word report to the Board of Director of Schmeckt Gut in which you address the following:
Dependent Variable – Annual Demand
Independent Variables: X1 = Average income per person
X2= Tariff on Imports of energy bars
X3 = Number of stores
X4 = Inflation
Each Excel table should be similar in form to the one for the Base Case below but have different figures for the independent variables due to the fact that assumptions will change from case to case.
Example of Excel Table - Base Case
Average Income per person
Tariff on energy bars
Number of stores
Remember to create Excel tables for the for the Worst Case and Best Case scenarios as well.
IMPORTANT INFORMATION ON LOG LINEAR REGRESSION
Normal Regression equation is Y =bo +b1X1 +b2X2 +b3X3 +b4X4 + error term
Log Linear form is log Y = bo +b1X1 +b2X2+ b3X3+b4X4 +error term
Please calculate the Log of Y base e (this is = LN(Y) in Excel. Do not calculate the logs of X1, X2, X3 and X4 as discussed in class. Perform the regression with log of Y against the values of X1, X2, X3 and X4 which have not been transformed to logarithms.