Doors When Trying to Reduce Energy Costs for a Home

question 101

Essay

Doors When trying to reduce energy costs for a home, one strategy is to install high quality
doors. A consumer service wants to test two brands (A and
B) of doors to see which is more
effective at preventing loss of heat. They have four doors of each brand they will install in a
small cabin built for this purpose. The cabin has places for four doors on the north wall and
four on the south wall. The inside of the cabin will be heated, and monitors will be placed
outside each door to measure the amount of heat loss.

a. Use the random numbers given to decide which doors to to put in which position.
Explain your method clearly.

b. Briefly explain why your assignment strategy is important in helping the manager assess
the effectiveness of the doors.

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Definitions:

DFL

Degree of Financial Leverage, a ratio that measures the sensitivity of a company's earnings per share to fluctuations in its operating income, based on its capital structure.

ROCE

Return on Capital Employed; a financial ratio that measures a company's profitability and the efficiency with which its capital is used.

Financing Charges

Interest and other costs associated with borrowing funds or purchasing goods and services on credit.

ROE

Return on Equity; a financial ratio that measures the profitability of a company in relation to the amount of equity, indicating how effectively shareholder equity is being utilized to generate profits.