Predicting health care charges of insurance beneficiaries (30 points). Health insurance companies often have to cover a sizable portion of the health care costs of their primary beneficiaries. Thus, it is of practical interest for these companies to predict the cost of medical bills from individual patient characteristics. In this problem, we will consider predicting the medical costs (or charges) in dollars for 𝑛 = 1338 primary beneficiaries
Predicting birthweight based on maternal risk factors (34 points). In this problem, we will consider predicting the birthweight (birthwt) of newborns in milligrams, using the age of the mother at the time of delivery (age), the weight of the mother at the last menstrual period (lwt) in kilograms, and the mother’s race (race)
Predicting home sales prices from square footage (36 points). In this problem, we will consider predicting house sale prices (SalePrice) from square footage (SqrFeet) using a dataset of 𝑛 = 506 houses.
A prime number (or a prime) is a natural number that has exactly two distinct natural number divisors: 1 and itself. The purpose of this problem is to write a function (say its name is check.prime) to check whether or not a given natural number is a prime. Unless you want to use some other more advanced method, you can write your function based on the so-called “trial division” method. The idea is as follows. For a positive integer
Solved: Suppose a company lengthens the time it takes to pay suppliers. How would this affect the statement of cash flows? How sustainable is the change in cash flows from this practice?
Solved: In recent years, several manufacturing companies have reported the cash flow from the sale of Treasury securities in the cash from operations section of the statement of cash flows. What is the problem with this practice? Is there any situation in which this practice would be acceptable
There are many ways of using standardized financial information beyond those discussed in this chapter. The usual goal is to put firms on an equal footing for comparison purposes. For example, for auto manufacturers, it is common to express sales, costs, and profits on a per-car basis. For each of the following industries, give an example of an actual company and discuss one or more potentially useful means of standardizing financial information:
a. Public utilities. b. Large retailers. c. Airlines. d. Online services. e. Hospitals. f. College textbook publishers.
Solved: So-called same-store sales are a very important measure for companies as diverse as McDonald’s and Sears. As the name suggests, examining same-store sales means comparing revenues from the same stores or restaurants at two different points in time. Why might companies focus on same-store sales rather than total sales?
Solved: Specialized ratios are sometimes used in specific industries. For example, the so-called book-to-bill ratio is closely watched for semiconductor manufacturers. A ratio of .93 indicates that for every $100 worth of chips shipped over some period, only $93 worth of new orders were received. In November 2016, the semiconductor equipment industry’s book-to-bill ratio was .96, compared to .91 during the month of October 2016.
Solved: Why is the DuPont identity a valuable tool for analyzing the performance of a firm? Discuss the types of information it reveals compared to ROE considered by itself.
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