Because of uncertainty in real estate markets, many homeowners are considering remodeling and constructing additions rather than selling, probably the most expensive room in the house to remodel is the kitchen, with an average cost of about $23,400. In terms of resale value, is remodeling the kitchen worth the cost? The following cost and resale figures are published by remodeling magazine for 11 cities. Assume the differences are
City |
Cost |
Resale |
Atlanta |
$20427 |
$25163 |
Boston |
$27255 |
$24625 |
Des Moines |
$22115 |
$12600 |
Kansas City |
$23256 |
$24588 |
Louisville |
$21877 |
$19267 |
Portland |
$24255 |
$20150 |
Raleigh |
$19852 |
$22500 |
Reno |
$23624 |
$16667 |
Ridgewood |
$25885 |
$26875 |
San Francisco |
$28999 |
$35333 |
Tulsa |
$20836 |
$16292 |
Requirements:
- Use the above data to construct a 99% confidence interval for the difference between cost and added resale value of kitchen remodeling.
- At 1% level of significance, is there evidence that the difference between cost and added resale value of kitchen remodeling exist?
- Which test statistics is applicable in this case and why?
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