Question

Background: Crossland Construction’s design/build department allows their clients (owners) to select the design and construction team based on their combined experience and track-record. Design/build firms typically have a cash flow problem since they tend to be paid in lump sums when projects are completed or hit milestones. However, their expenses, such as payroll, must be paid regularly. So, such firms need bank lines of credit to finance their initial costs, but in the past year, lines of credit were difficult to negotiate. The data file Crossland Construction contains month-end cash balances for the past 16 months.

e) Use the t² transformation approach and recompute the linear model using the transformed time variable. Discuss whether this model appears to provide a better fit than did the model without the transformation. Compare the coefficients of determination for the two models. Which model seems to be superior, using the coefficient of determination as the criterion?

Data:

Month	Cash Balance
1	75
2	70
3	77
4	89
5	80
6	92
7	91
8	102
9	106
10	130
11	155
12	160
13	180
14	199
15	240
16	305

I have the information to compare this to. I just have no idea how or what the t^2 transformation approach is.

Answer 1