The Table Below Lists Weights (Carats) and Prices (Dollars) for Randomly

question 124

Essay

The table below lists weights (carats) and prices (dollars) for randomly selected diamonds. Find the regression
equation, letting the weight be the predictor variable. Find the best predicted price for a diamond with a weight
of 1.50 carats. What is wrong with predicting the price of a 1.50-carat diamond? $$\begin{array} { | l | l | l | l | l | l | l | } \hline \text { Weight } & 0.3 & 0.4 & 0.5 & 0.5 & 1.0 & 0.7 \\\hline \text { Price } & 510 & 1151 & 1343 & 1410 & 5669 & 2277 \\\hline\end{array}$$

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Definitions:

CCA Rate

Capital Cost Allowance rate, which is the percentage used to calculate depreciation for tax purposes on capital assets.

Salvage Value

The estimated resale value of an asset at the end of its useful life, considered in depreciation calculations.

After-Tax Cost of Debt

The net cost of debt to a company after accounting for tax deductions on interest payments, indicating the actual cost of borrowing.

CCA Class

Capital Cost Allowance Class, categories used in Canadian tax law for determining the depreciation rate for tax purposes on assets.