Instruction 9-4 A Drug Company Is Considering Marketing a New Local Anaesthetic

question 99

Short Answer

Instruction 9-4
A drug company is considering marketing a new local anaesthetic. The effective time of the anaesthetic the drug company is currently producing has a normal distribution with a mean of 7.4 minutes with a standard deviation of 1.2 minutes. The chemistry of the new anaesthetic is such that the effective time should be normal with the same standard deviation, but the mean effective time may be lower. If it is lower, the drug company will market the new anaesthetic; otherwise, it will continue to produce the older drug. A sample of size 36 results in a sample mean of 7.1. A hypothesis test will be done to help make the decision.
-Referring to Instruction 9-4,what is the power of the test if the mean effective time of the anaesthetic is 7.5 using a 0.10 level of significance?

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Definitions:

Financing

The act of providing funds for business activities, making purchases, or investing.

Capital

Long-term assets or the money used to support long-term assets and projects. Long-term debt and equity on the balance sheet.

Profitability Index

A capital budgeting tool that measures the relationship between the present value of cash inflows and the initial investment, indicating the relative profitability of a project.

Cost of Capital

The rate of return a company must earn on its projects to maintain its market value and attract funding, often consisting of debt and equity costs.