Use a 005 Significance Level and Conduct a Full Hypothesis Test

question 71

Essay

Use a 0.05 significance level and conduct a full hypothesis test. List the null and alternative hypotheses, the z-score, the P-value, and whether to reject or not reject the null hypothesis. Round z-scores to the nearest tenth.
-In tests of a computer component, it is found that the mean time between failures is 937 hours. A modification is made which is supposed to increase reliability by increasing the time between failures. Tests on a sample of 36 modified components produce a mean time between failures of 960 hours, with a standard deviation of 52 hours. Test the claim that for the modified components, the mean time between failures is greater than 937 hours.

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Definitions:

Net Present Value Rule

A principle that states an investment should be made if the net present value of its cash flows, discounted at the hurdle rate, is positive.

Invest

The act of allocating resources, usually money, with the expectation of generating an income or profit.

Cost of Capital

The rate of return that a company must earn on its investment projects to maintain its market value and attract funds.

Present Value

The current value of a future sum of money or stream of cash flows given a specified rate of return.