# 1. You are given the following information regarding the CAP test for clericalemployees (clerk-2s) at the Berol Corporation:Average tenure as…

1. You are given the following information regarding the CAP test for clerical

employees (clerk-2s) at the Berol Corporation:

Average tenure as a clerk-2: 7.26 years

Number selected per year: 120

Validity of the CAP test: 0.61

Validity of previously used test: 0.18

Cost per applicant of CAP: $35

Cost per applicant of old test: $18

SR: 0.50

Ordinate at SR: 0.399

SD, in first year: $34,000

Use Equation 10-1 to determine (a) the total utility of the CAP test, (b) the utility

per selectee, and (c) the per-year gain in utility per selectee.

2 . Referring to Exercise 1, suppose that after consulting with the chief financial

officer at Berol, you are given the following additional information: variable costs

are –0.08, taxes are 40 percent, and the discount rate is 8 percent. Use Equation

10-2 in this chapter to recompute the total utility of the CAP test, the utility per

selectee, and the utility per selectee in the first year.

3. The Top Dollar Co. is trying to decide whether to use an assessment center to

select middle managers for its consumer products operations. The following

information has been determined: variable costs are –0.10, corporate taxes are

44 percent, the discount rate is 9 percent, the ordinary selection procedure costs

$700 per candidate, the assessment center costs $2,800 per candidate, the standard

deviation of job performance is $55,000, the validity of the ordinary procedure

is 0.30, the validity of the assessment center is 0.40, the selection ratio is 0.20, the

ordinate at that selection ratio is 0.2789, and the average tenure as a middle manager

is 3 years. The program is designed to last 6 years, with 20 managers added

each year. Beginning in Year 4, however, one cohort separates each year until all

hires from the program leave.

Use Equation 10-6 in this chapter to determine whether Top Dollar Co. should

adopt the assessment center to select middle managers. What payoffs can be

expected in total, per selectee, and per selectee in the first year?