# Scenario Analysis - Car Sold

*label*Statistics

*timer*Asked: Apr 25th, 2017

**Question description**

A finance manager employed by an automobile dealership believes that the number of cars sold in his local market can be predicted by the interest rate charged for a loan.

Interest Rate (%) | Number of Cars Sold (100s) |

3 | 10 |

5 | 7 |

6 | 5 |

8 | 2 |

The finance manager performed a regression analysis of the number of cars sold and interest rates using the sample of data above. Shown below is a portion of the regression output.

Regression Statistics | |

Multiple | 0.998868 |

| 0.997738 |

Coefficient | |

Intercept | 14.88462 |

Interest Rate | -1.61538 |

Specially, the following critical elements must be addressed;

**Main elements:**

Are there factors other than interest rate charged for a loan that the finance manager should consider in predicting future car sales?

**Integration and Application**:

Is interest rate charged for a loan the most important factor to be considered in predicting future car sales? Explain your reasoning.

The dealership’s vice-president of marketing has requested a sales forecast at the prevailing interest rate of 7%.

**Analysis:**

As finance manager, what reasons would you convey to the vice-president in recommending this forecasting model?

**Critical Thinking**

Is the prediction of car sales at 7% a reflection of the current downturn in the economy? How might this impact the dealership’s business?

Analysis of this scenario should be 1-2 page Microsoft word document with double spacing and 12 point Times New Roman font