(Continuation of Problem XXXXXXXXXXChoose a different set of prior probabilities and costs of misclassification that seems reasonable and repeat the analysis PROBLEM 11.2 For the data shown in Table...

(Continuation of Problem 11.2.) Choose a different set of prior probabilities and costs of misclassification that seems reasonable and repeat the analysis

PROBLEM 11.2

For the data shown in Table 9.1, divide the chemical companies into two groups: group I consists of those companies with a P/E less than 9, and group II consists of those companies with a P/E greater than or equal to 9. Group I should be considered mature or troubled firms, and group II should be considered growth firms. Perform a discriminant function analysis, using ROR5, D/E, SALESGR5, EPS5, NPM1, and PAYOUTR1. Assume equal prior probabilities and costs of misclassification. Test the hypothesis that the population D 2 = 0. Produce a graph of the posterior probability of belonging to group I versus the value of the discriminant function. Estimate the probabilities of misclassification by several methods