Analyze the Railroad Industry to view the overall health of the nation
Create a 10 page paper in APA format on the following subject. You will research all of the provided links below. The goal of the Final Project is to analyze the Railroad Industry to view the overall health of the nation. According to renowned businessman and investor Warren Buffet, the railroad industry is the lifeblood of the nation. In fact, Mr. Buffet does a multifaceted study of this industry several times a year to generate what he thinks is an assessment of overall economic health as he buys stock in different industrial sectors. You are to become a statistical analyst for Berkshire Hathaway, and as such you have been given a number of articles, some with data, and some with strategies, to conduct your very own analysis.
Use the following two forecast equations to begin your analysis:
Why would you suppose that Mr. Buffet uses railroad revenues to provide him with information on the economy? Through substituting X1 to predict GDP and representing its slope with b1.
Equation 1. Here is the simple simulative GDP forecast formula you can use. This simulation suggests that what has happened or could happen in railroad revenues is also happening in the overall economy. Therefore, this model can become a proxy for the economy without needing to go out into the economy using GDP totals which may at times be difficult to obtain.
Y = bo + b1X1 + E
Y = GDP
X1 = Railroad Revenues
You may utilize these 5 sources for railroad information (you may also add some of your own sources):
Reed, D. (2010, March 25). Warren Buffet sees strong rail system as key to U.S. growth. USA Today on the Web.
Retrieved from http://www.usatoday.com/money/companies/management/2010-03-25-buffett23_CV_N.htm
Zacks Equity Research. (2011, February 2). Railroad industry outlook – Feb. 2011. Retrieved from
http://www.zacks.com/stock/news/46995/Railroad+Industry+Outlook+-+Feb.+2011
Research and Innovative Technology Administration, Bureau of Transportation Statistics. (2010). Rail freight revenue
ton-miles. Retrieved from http://www.bts.gov/publications/key_transportation_indicators/february_2010/
html/rail_revenue_ton_miles.html
Surface Transportation Board. (n.d.). Railroad revenue deflator factors. Retrieved from http://www.stb.dot.gov/
Econdata.nsf/M%20Railroad%20Revenue%20Deflator%20Factors?OpenPage
Taschler, J. (2009, March 13). Railroad carload freight declines, reflecting economic slump. Journal Sentinel Online.
Retrieved from http://www.jsonline.com/business/41217287.html
Equation 2. Use the following formula to examine both freight and passenger affects on railroad industry profits. This model assesses both freight and passenger profits, helping the railroad companies determine what products or services might be productive or might need to be dropped:
Using the formula P = b1X1 + bX2 + Bo + E
P = Profits
X1 = Revenues – Costs (Freight)
X2 = Revenues – Costs (Passengers)
Using this multiple regression formula and the information you have, determine which variable would have the largest effect on railroad profits. After making your assessment, would you suppose the slopes of both b1 and/or b2 would be positive?
You may utilize these 3 recommended sources for railroad information (you may also add some of your own sources):
Zacks Equity Research. (2010, October 1). Railroad industry outlook – Oct. 2010. Retrieved from
http://www.zacks.com/stock/news/40950/U.S.+Railroad+Industry+Outlook+-+Oct.+2010
Carey, N. (2009, January 21). BNSF profit up despite carload drop of 7 percent. Reuters U.S. edition online. Retrieved
from http://www.reuters.com/article/2009/01/22/us-bnsf-idUSTRE50K6PP20090122
Roberts, R. (1991, March). Amtrak’s pursuit of profits – National Railroad Passenger Corp. Railway Age. Retrieved from
http://findarticles.com/p/articles/mi_m1215/is_n3_v192/ai_10483179/
Once you complete your study, you are to present your findings to Mr. Buffet. Include what you believe to be the most pertinent information that Mr. Buffet may need to make an educated forecast for future investments according to the economic health of the nation.
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