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
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?