Forecast and Combined Analysis and Implementation:

Use the following two forecast equations to begin your analysis:

Equation 1. Here is the simple simulative GDP forecast formula you can use. This simulation suggests that what has happened or could happen in railroad revenues is also happening in the overall economy. Therefore, this model can become a proxy for the economy without needing to go out into the economy using GDP totals which may at times be difficult to obtain. 
Y = bo + b1X1 + E
Y = GDP
X1 = Railroad Revenues
Forecast GDP by using at least two different series for railroad revenues substituting them into X1.

Summarize the results of using different series of railroad revenues to predict GDP.

You may utilize these four sources for railroad information (you may also add some of your own sources):

• Reed, D. (2010, March 25). Warren Buffet sees strong rail system as key to U.S. growth. USA Today. Retrieved from http://usatoday30.usatoday.com/money/companies/management/2010-03-25-buffett23_CV_N.htm
• Surface Transportation Board. (n.d.). Railroad revenue deflator factors. Retrieved from http://www.stb.dot.gov/Econdata.nsf/M%20Railroad%20Revenue%20Deflator%20Factors?OpenPage
• Taschler, J. (2009, March 13). Railroad carload freight declines, reflecting economic slump. Journal Sentinel. Retrieved from http://www.jsonline.com/business/41217287.html
• Zacks Equity Research. (2011, February 2). Railroad industry outlook - Feb. 2011. Retrieved from http://www.zacks.com/stock/news/46995/Railroad+Industry+Outlook+-+Feb.+2011

Equation 2. Use the following formula to examine how both freight and passenger loads affect railroad industry profits. This model assesses both freight and passenger profits, helping the railroad companies determine what products or services might be productive or might need to be dropped:
Using the formula P = Bo + b1X1 + b2X2 + E
P = Profits
X1 = Revenues - Costs (Freight)
X2 = Revenues - Costs (Passengers)
Using this multiple regression formula and the information you have, determine which variable would have the largest effect on railroad profits.

Evaluate the sign and size of b1 and b2.

You may utilize these three recommended sources for railroad information (you may also add some of your own sources):

• Carey, N. (2009, January 21). BNSF profit up despite carload drop of 7 percent. Reuters U.S. edition online. Retrieved from http://www.reuters.com/article/2009/01/22/us-bnsf-idUSTRE50K6PP20090122
• Roberts, R. (1991, March). Amtrak's pursuit of profits. Railway Age, 192(3), 48. Retrieved from http://www.railwayage.com/
• Zacks Equity Research. (2010, October 1). U.S. railroad industry outlook - Oct. 2010. Retrieved from http://www.zacks.com/stock/news/40950/U.S.+Railroad+Industry+Outlook+-+Oct.+2010

Once you complete your study, you are to present your findings to Mr. Buffet. Include what you believe to be the most pertinent information that Mr. Buffet may need to make an educated forecast for future investments according to the economic health of the nation