Cross-Sectional Regression Analysis WasteTec is a large construction company that specializesin the construction of large wastewater treatment plants and recycling plants. A major cost driver ineither type of facility is the capacity of the plant. For example, the capacity of a recycling plant ismeasured by the number of tons of water per day (TPD) that the plant can process. These plants canvary in size from a few hundred TPD to as many as several thousand TPD. Regression analysis is auseful method to estimate the cost of a new plant by using a regression equation developed from priorplant construction projects. The dependent variable of the regression is the actual construction costsof each project, while the independent variable is the TPD for the plant. Below is a sample of somerecent projects and the related construction costs (in thousands):TPD CostsCommerce, CA 360 $ 59,369Hudson Falls, NY 400 77,013Layton, UT 420 50,405Oxford Township, NJ 450 75,779Savannah, GA 500 87,439Poughkeepsie, NY 506 57,463Panama City, FL 510 60,730Ronkonkoma, NY 518 84,457Okahuma, FL 528 88,119Spokane, WA 800 152,902Arlington, VA 975 127,021Camden, NJ 1,050 163,395York, PA 1,344 139,302Bridgeport, CT 2,250 344,852Chester, PA 2,688 448,073Required1. Develop a regression model to predict the cost of a proposed new plant in Babylon, New York, whichwill have a required capacity of 750 TPD. What is the predicted cost for the Babylon plant?2. Evaluate the precision and reliability of the regression you have developed. How could it be improved?3. How would you incorporate sustainability issues in the analysis you have completed in requirements 1and 2?
Cross-Sectional Regression Analysis WasteTec is a large construction company that specializes
in the construction of large wastewater treatment plants and recycling plants. A major cost driver in
either type of facility is the capacity of the plant. For example, the capacity of a recycling plant is
measured by the number of tons of water per day (TPD) that the plant can process. These plants can
vary in size from a few hundred TPD to as many as several thousand TPD. Regression analysis is a
useful method to estimate the cost of a new plant by using a regression equation developed from prior
plant construction projects. The dependent variable of the regression is the actual construction costs
of each project, while the independent variable is the TPD for the plant. Below is a sample of some
recent projects and the related construction costs (in thousands):
TPD Costs
Commerce, CA 360 $ 59,369
Hudson Falls, NY 400 77,013
Layton, UT 420 50,405
Oxford Township, NJ 450 75,779
Savannah, GA 500 87,439
Poughkeepsie, NY 506 57,463
Panama City, FL 510 60,730
Ronkonkoma, NY 518 84,457
Okahuma, FL 528 88,119
Spokane, WA 800 152,902
Arlington, VA 975 127,021
Camden, NJ 1,050 163,395
York, PA 1,344 139,302
Bridgeport, CT 2,250 344,852
Chester, PA 2,688 448,073
Required
1. Develop a regression model to predict the cost of a proposed new plant in Babylon, New York, which
will have a required capacity of 750 TPD. What is the predicted cost for the Babylon plant?
2. Evaluate the precision and reliability of the regression you have developed. How could it be improved?
3. How would you incorporate sustainability issues in the analysis you have completed in requirements 1
and 2?
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