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Mean Square Error

Decent Essays

From the data generated and prior market research the refurbishment option appears to be the most favourable to the business. When £36,000 is invested into refurbishing the Foodhall into a specialty food department, the business can anticipate a net present value of £914,450 (See Appendix 2, Refurbishment net cash flow model). Whereas, if £90,000 is invested into replacing the Foodhall with a new department then a net present value of only £901,727 is to be expected (See Appendix 3, Replacement net cash flow model).
From these figures it appears as if the refurbishment option would be best for the business as not only is the initial investment less than half that of the replacement option but,
Market research was conducted on local competition and the overall markets of both Nursery and Specialty Food retail. …show more content…

This particular models accuracy can be tested using two standards; Mean Absolute Deviation (MAD) and Route Mean Square Error (RMSE). With regards to the York store the figures calculated for these were: a MAD of 4.6% and RMSE of 6.2%. Both of these figures are below 10% therefore meaning that this model can be considered reliable and accurate.
This report is being produced with the intention of analysing the two potential ideas for the failing Foodhall in the York store in order to stimulate revenue. The two options that are being considered are; refurbishment into a speciality food and wine department or replacement with a new department which would be Nursery. This department would sell clothes, equipment and toys for babies between 0 and 36 months.
This change has become necessary as the Foodhall revenue is expected to fall in the next few years due to the limited space in city centre stores and the major growth of major supermarket chains in city

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