8 Problem 1 (7 marks) The amount spent for advertising by Omantel Company from 2012 to 2020 is given in the table. The actual Sales achieved and the Forecast values that were calculated for sales for each year is also provided as follows: Areas Advertising Expense Sales Forecast (thousands) (millions) (millions) 2012 18 14 14.5 2013 15 12 11 2014 12 11 11.2 2015 10 7.7 2016 20 12 11.6 2017 28 16 16.6 2018 35 18 18.5 2019 30 19 20 2020 20 13 12 a. Calculate the regression equation. (1 mark) b. Calculate the correlation coefficient and interpret it. (1 mark) c. Can the company use advertising expense to forecast its sales? Why or why not? (1 mark) d. The company is planning to spend 25,000 dollars towards advertising in 2021. Calculate the expected sales. (1 mark) e. Compute the MAD value to arrive at the forecast accuracy. (1 mark) Problem 2 (3 marks) A Hotel apartment owner who is planning to start his business needs to decide whether he must rent - one floor or two floor building. One floor building has a fixed rental cost of $30,000 per year, and the two floor building will mean a fixed rental cost of $50,000. Variable costs involved are $300 per customer, and revenue will be $1000 per customer. If the first month demand is 50 customers, how much will the profit be from using each of the options- (1) one floor building: (ii) two floors building. ***