1) Value line estimates of sales and earnings growth for individual companies are derived by correlating sales, earnings, and dividends to suitable components of National Income Accounts capital spending, Jason Black, the analyst for Value Line is examining trend of the capital spending variable from 1977 to 1993. Data are given below in table:
a) Plan data and find out the suitable trend model for the years 1977 to 1993.
b) If the suitable model is linear, find out linear trend model for the years 1977 to 1993.
TABLE CAPITAL SPENDING(BILLIONS),1977-1993
YEAR BILLION YEAR BILLION YEAR BILLION
1977 214 1983 357 1989 571
1978 259 1984 416 1990 578
1979 303 1985 443 1991 556
1980 323 1986 437 1992 566
1981 369 1987 443 1993 623
1982 367 1988 545 1994 680(estimate)
c) Determine the average increase in capital spending per year been since 1977?
d) Evaluate the trend value for capital spending in 1994?
e) Evaluate your trend estimate with Value Line’S.
f) prepare down the factor which influence trend of capital spending?