The value of a sports franchise is directly related to the amount of revenue that a franchise can generate. The accompanying data table gives the value and the annual revenue for

15

major sport teams. Suppose you want to develop a simple linear regression model to predict franchise value based on annual revenue generated. Complete parts (a) through (e) below.

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Part 1

a. Construct a scatter plot. Choose the correct graph below.

A.

09000300FranchiseValue($M)AnnualRevenue($M)

A scatter plot has a horizontal axis labeled Franchise Value in millions of dollars from 0 to 900 in increments of 100 and a vertical axis labeled Annual Revenue in millions of dollars from 0 to 300 in increments of 50. A series of plotted points are clustered around a line that rises from left to right passing through the points (300,190) and (400,210). All coordinates are approximate.

B.

03000900AnnualRevenue($M)FranchiseValue($M)

A scatter plot has a horizontal axis labeled Annual Revenue in millions of dollars from 0 to 300 in increments of 50 and a vertical axis labeled Franchise Value in millions of dollars from 0 to 900 in increments of 100. A series of plotted points are clustered around a line that rises from left to right passing through the points (200,380) and (250,570). All coordinates are approximate.

C.

09000300FranchiseValue($M)AnnualRevenue($M)

A scatter plot has a horizontal axis labeled Franchise Value in millions of dollars from 0 to 900 in increments of 100 and a vertical axis labeled Annual Revenue in millions of dollars from 0 to 300 in increments of 50. A series of plotted points range from horizontal coordinates 230 to 720 and vertical coordinates 150 to 280 with no obvious pattern. All coordinates are approximate.

D.

03000900AnnualRevenue($M)FranchiseValue($M)

A scatter plot has a horizontal axis labeled Annual Revenue in millions of dollars from 0 to 300 in increments of 50 and a vertical axis labeled Franchise Value in millions of dollars from 0 to 900 in increments of 100. A series of plotted points range from horizontal coordinates 150 to 280 and vertical coordinates 230 to 720 with no obvious pattern. All coordinates are approximate.

Part 2

b. Use the least-squares method to determine the regression coefficients

b0

and

b1.

b0	=	enter your response here
b1	=	enter your response here
		(Round to two decimal places as needed.)

Part 3

c. Interpret the meaning of

b0

and

b1

in this problem. Choose the correct answer below.

A.

The Y-intercept,

b0,

implies when the annual revenue is zero, the franchise value is

b0,

in millions dollars. The slope,

b1,

implies the revenue is equal to

b1,

in millions of dollars.

B.

The Y-intercept,

b0,

implies that if the annual revenue is zero, the franchise value is equal

b0,

in millions of dollars. The slope,

b1,

implies that for each increase of 1 million dollars in annual revenue, the franchise value is expected to decrease by

b1,

in millions of dollars.

C.

An interpretation of the Y-intercept,

b0,

is not meaningful because no sports franchise is going to have a revenue of zero. The slope,

b1,

implies that for each increase of 1 million dollars in annual revenue, the franchise value is expected to increase by

b1,

in millions of dollars.

D.

The Y-intercept,

b0,

implies that if the annual revenue is zero, the franchise value is equal to the value of

b0,

in millions of dollars. The slope,

b1,

implies that the average franchise value is equal to

b1,

in millions of dollars.

Part 4

d. Predict the mean franchise value (in millions of dollars) of a sports team that generates

$250

million of annual revenue.

Yi=$enter your response here

million (Round to the nearest integer as needed.)

Part 5

e. What would you tell a group considering an investment in a major sports team about the relationship between revenue and the value of a team?

A.

The value of the franchise can be expected to increase as revenue increases.

B.

The value of the franchise can be expected to increase as revenue decreases.

C.

The value of the franchise can be expected to decrease as revenue increases.

D.

The value of the franchise is not affected by the changes in revenue.

Annual_Revenue_(millions_of_dollars) Franchise_Value_(millions_of_dollars) 213 380 195 261 159 306 248 499 257 571 242 641 208 495 221 447 154 230 239 453 277 722 225 568 188 357 194 260 223 460