Susan decides to run a pizza franchise in her hometown.

To determine the cost of the initial investment for her startup, she hired an analyst to help her to analyze the startup cost (all figures in $thousands) and the annual franchise fee ($ 000) for the pizza shop. The analyst collected data from 15 different pizza franchises and listed those in the following table:

Annual Franchise Fee ($ 000)

Startup Cost

($ 000)

Annual Franchise Fee ($ 000)

Startup Cost

($ 000)

1,000 1,050 1,100 1,250 1,125 1,150 1,350 1,830 1,087 1,213 1,275 1,350 1,070 1,275 1,375 1,450 1,100 1,300 1,175 1,300 1,150 1,300 1,200 1,300 1,250 1,400 1,175 1,275 1,150 1,400

a. Draw a scatter plot for these data and comment on it.

b. Compute the correlation coefficient value for the startup cost and annual franchise fee. Interpret your finding.

c. Construct a hypothesis test, at 1% significance level, to determine whether the startup cost will be influenced by the annual franchise fee. Write a conclusion for Susan to help her make her decision.