In potash mining, large conveyors are used underground to haul ore from the rock face to shafts through which it can be lifted to the surface for processing. A conveyer hauling one tonne per second consumes about 250 kilowatts of electric power. Automatic control of conveyors can reduce electric power consumption by shutting down conveyors when they’re not required.
A salesperson for such automatic control systems visits PotashCorp of Saskatchewan to offer a system for a new mine that PotashCorp is planning. The system will have a capital cost of $1.3 million, and PotashCorp needs to know (a) how much electric power cost it can expect to save in an average month. The company also wants to be 90% sure of the savings it will get, so management asks the salesperson (b) what level of savings it can be 90% sure of exceeding in any given month.

The salesperson has been provided with a linear regression analysis of Monthly Power Saving in $K (MPS) against System Capital Cost (SCC) in $M for all installations
his company has done to date:

Dependent variable: MPS (average value 11.17)
Explanatory variable: SCC (average value 1.242)
R-squared: 79.1%
s = 3.42
df = 12 - 2 = 10

Assuming the conditions for linear regression apply, what answers should the salesperson give to PotashCorp’s questions in parts (a) and (b) above?

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Cofficients Standard Error P-value t-stat 1.953206 0.408831 0.691282 Intercept SC 0.79853 8.350177 6.152057 0.000108 1.357298