This document presents the results of an investigation into the prediction of first-year average in graduate management school based on undergraduate grade point average and GMAT scores. It is found that the use of a single prediction equation for both Black students and White students tends to produce overpredictions of the former's graduate school performance. Substantial effort is devoted to developing a prediction system which takes into account ethnic status. This approach is made practicable by employing the empirical Bayes estimation paradigm, and the new predictions represent a substantial improvement over the ones based on a single equation for both races. (65pp.)