Individual Assignment

Name of the student: Saumya Tiwari

Roll no. : MS19CMM035
Section: MGB Section A
Objective: To find the most reasonable price for Bet Performer to the client.

Variables: Age at Sale, Dead- Weight Tons, Trailing 1-Year Average Monthly Baltic Dry Capesize
Index

A)

SUMMARY OUTPUT

Regression Statistics
Multiple R 0.352336
R Square 0.124141
Adjusted R Square 0.105101
Standard Error 32.06472
Observations 48

ANOVA
df SS MS F Significance F
Regression 1 6703.376817 6703.377 6.519865 0.014047815
Residual 46 47294.74131 1028.147
Total 47 53998.11813

Coefficients Standard Error t Stat P-value Lower 95% Upper 95%Lower 95.0%
Upper 95.0%
Intercept 36.43079 15.03469097 2.423115 0.019382 6.167526751 66.69405 6.167527 66.69405
Trailing 1-Year Average
Monthly Baltic Dry Capesize
Index 0.004778 0.001871415 2.553403 0.014048 0.001011513 0.008545 0.001012 0.008545

Figure 1: Regression table of Capesize Index and Sale Price

SUMMARY OUTPUT

Regression Statistics
Multiple R 0.514805345
R Square 0.265024544
Adjusted R Square 0.249046816
Standard Error 29.37289919
Observations 48

ANOVA
df SS MS F Significance F
Regression 1 14310.82662 14310.83 16.58712398 0.000181352
Residual 46 39687.29151 862.7672
Total 47 53998.11813

Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Lower 95.0% Upper 95.0%
Intercept -84.165099 38.81113968 -2.16858 0.035321419 -162.2878712 -6.042326759 -162.2878712 -6.042326759
Dead-Weight Tons 0.988586133 0.242733081 4.072729 0.000181352 0.499989782 1.477182484 0.499989782 1.477182484

Figure 2: Regression table of Dead-Weight Tons and Sale Price

 SUMMARY OUTPUT

Regression Statistics
Multiple R 0.787490754
R Square 0.620141688
Adjusted R Square 0.611883899
Standard Error 21.11646482
Observations 48

ANOVA
df SS MS F Significance F
Regression 1 33486.48414 33486.48 75.0977846 3.14681E-11
Residual 46 20511.63398 445.9051
Total 47 53998.11813

Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Lower 95.0% Upper 95.0%
Intercept 133.129532 7.583170754 17.55592 5.09907E-22 117.865401 148.393663 117.865401 148.393663
Age at Sale -4.216521951 0.48656493 -8.6659 3.14681E-11 -5.195926356 -3.237117545 -5.195926356 -3.237117545

Figure 3: Regression table for Sale Price and Age at Sale

R square value of Sale Price and Age at Sale is 62.01%

R square value of Sale Price and Dead-Weight Tons is 26.5%

R square value of Sale Price and Capesize Index is 12.41%

SUMMARY OUTPUT

Regression Statistics
Multiple R 0.9593911
R Square 0.9204312
Adjusted R Square 0.915006
Standard Error 9.8817623
Observations 48

ANOVA
df SS MS F Significance F
Regression 3 49701.55219 16567.18 169.6602 3.38931E-24
Residual 44 4296.565939 97.64923
Total 47 53998.11813

Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Lower 95.0% Upper 95.0%
Intercept 44.22151 16.3836613 2.699123 0.009826 11.20241024 77.24060971 11.20241024 77.24060971
Age at Sale -4.543797 0.261475925 -17.3775 2.53E-21 -5.07076692 -4.016826718 -5.07076692 -4.016826718
Dead-Weight
Trailing 1-YearTons
Average 0.2421714 0.091618122 2.643269 0.011333 0.057527193 0.426815577 0.057527193 0.426815577
Monthly Baltic Dry Capesize
Index 0.0072071 0.000598091 12.0501 1.57E-15 0.006001683 0.008412429 0.006001683 0.008412429

Figure 4: Regression table of three variables with Sale Price

Equation:

Sale Price = -4.544 *(Age at Sale) + 0.2422 * (Dead-Weight Tons) + 0.0072 *(Monthly
Baltic Dry Capesize Index) + 44.22151

We can see that the adjusted R is 91.5% which has explained the relationship of 3 variables with Sale
Price.
 Age at Dead-Weight Trailing 1-Year
Sale Price Sale Tons Average Monthly
Sale Price 1
Age at Sale -0.78749 1
Dead-Weight Tons 0.514805 -0.43126 1
Trailing 1-Year Average Monthly Baltic Dry Capesize Index 0.352336 0.217367 0.042751406 1

Figure 5: Correlation of three variables with Sale Price

In above figure we can see that Age at Sale is highly negatively correlated to Sale Price.

As we know the products such as cars, ships values deprecate with time. Older the ship, lesser will be
the value of it.

Dead-Weight Tons has 0.5148 correlation coefficient which says that heavier the weight the costly
the product. Because lot of material is being used, hence price will increase.

Capesize Index tells about the demand of the ship in the market, though it does not have very high
correlation with Sale Price but it is contributing towards the pricing of the ship.

B) As from the correlation coefficient table we can see that Age at Sale has strong relation with
Sale Price. Hence, Age at Sale is the best predictor for the pricing of the ship. But its better to
involve all the three variables because the following regression table of Sale Price and Age at
Sale has R Square value of 62%.
C) Other factors such as Dead-Weight Tons and Capesize Index have very small R Square value.
Hence, they shouldn’t be accepted as individual contributing factor for Sale Price.
D) We all three factors are combined i.e Age at Sale, Dead-Weight Tons, Capesize Index then
from figure 4 we can say that all the three variables have explained 91.5% of relationship with
Sale Price.
E) From Exhibit 3 we can see that with passing years Charter rates are increasing therefore, we
will be taking Capesize Index as 12479, Age at Sale = 11, Dead-Weight Tons = 172.
From equation:

Sale Price = -4.544 *(Age at Sale) + 0.2422 * (Dead-Weight Tons) + 0.0072 *(Monthly
Baltic Dry Capesize Index) + 44.22151

Sale Price = -4.544 *(11) + 0.2422 * (172) + 0.0072 *(12479) + 44.22151

Sale Price = $125.74 million

F) From the question Capesize Index = 8735.3, Age at Sale = 6, Dead-Weight Tons = 152.

Sale Price = -4.544 *(6) + 0.2422 * (152) + 0.0072 *(8735.3) + 44.22151

Sale Price = $116.67 million

3. If I were Basil Karatzas then I will recommend them to buy the product because from the Exhibit 4
ship named Sumihou sold for $106 million, Capesize Index = 9663, Age at Sale = 11, Dead-Weight Tons
= 171.1. So they are getting the most demanded ship only for $125.74 million, which is reasonable to
buy.