Use the Following Information to Answer Questions (5) - (7)

question 49

Multiple Choice

Use the following information to answer questions (5) - (7) . A tire manufacturer has made some
modifications to its most popular tire and wants to see if the tread on the modified tire will last
longer than the original tire. Because there is much variation in the way people drive, the
manufacturer decides to use blocking to reduce this variation. Twenty cars will be used to test the
tires. Ten cars are randomly selected to receive an original tire on the right rear wheel and a
modified tire on the left rear wheel. The remaining ten cars will receive an original tire on the left
rear wheel and a modified tire on the right rear wheel. Each car will then be driven 10,000 miles and
the amount of wear recorded for each wheel.
-Which test design would be most appropriate for this scenario?

• A)Two-sample t-test
• B)Paired t-test
• C)Two-sample z-test
• D)Paired z-test

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Definitions:

Net Operating Income

A financial metric that calculates a company's profit after all operating expenses are subtracted from total revenue.

Residual Income

The net income an investment generates above a minimum required return.

Average Operating Assets

The average value of assets used in day-to-day business operations over a period, used to evaluate the efficiency of asset use in generating revenue.

Required Rate of Return

The minimum return investors expect to receive on an investment, considering its risk.