Comparable transaction is a conventional method of evaluating the value of something that is ready for sale. To value a ship, one had to identify a set of “comparable” ships where comparability was based on four main factors: ship type, size (DWT), age, and condition.
The Bet Performer was a 11 year old ship, built in 1997, 172,000 DWT capsize bulk carrier. From the Exhibit 4, there are five ships which are the most comparable to Bet Performer. They are Martha Verity, Ingenious, Sumihou, Cape Sun, and Coppersmith. These ships all have the most similar characteristics, in terms of ship type, …show more content…
The Adjusted-R2 uses the variances instead of the variations. That means that it takes into consideration the sample size and the number of predictor variables. The value of the adjusted-R2 can actually increase with fewer variables or smaller sample sizes. The Adjusted-R2 in this case is 0.915. The 3 factors very well explain the ship prices.
d. Using all three factors, what is the predicted price for the Bet Performer?
We use the Least Square method to predict the ship price. The model would be, Price= β0 + β1X1+ β2X2+ β3X3+€, where b0 = ^β0= 44.23, b1 = ^β1= -4.5, b2 = ^β2= 0.24, b3 = ^β3= 0.007. S= 9.88. The equation is, price= 44.23+ age*-4.5 + DWT*0.24 + charter rates*0.007. We first calculate ^y, and calculate the residual from this, which is (y-^y). The Least Squares estimates are the values that minimize the quantity, . The observed variability of the responses about this fitted model is measured by the