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Chrome File Edit View History Bookmarks People Window Help Check Your Work ezto mheducation.com hm.tpx This window shows what is correct and incorrect for the work you have completed so far. Even if all of the work you have done so far is correct, you may not have completed everything value: 0.50 points The regression equation Netlncome 2,251 0.0415 Revenue was estimated from a sample of 100 leading world companies (variables are in millions of dollars). (a-1) If Revenue 1, then NetIncome million. (Round your answer to 2 decimal places (a-2) Choose the correct statement. Decreasing the revenue raises the net income OOIncreasing the revenue raises income. ncreasing the revenue lowers the net ncome (b) Choose the right option. OT he intercept is meaningful because a firm can have net income when revenue is zero OOThe intercept is not meaningful because a firm cannot have net income when revenue is zero. (c) If Revenue 20,256, then Netlncome million. (Round your answer to the nearest whole number. 87% Thu 10 Dec 08:51:20 a E cancel

Explanation / Answer

(a-1) Regression equation is as follows -

Net Income = 2,251 + 0.0415Revenue

If Revenue = 1

Net Income = 2,251 + 0.0415*1 = 2,251 + 0.0415 = 2,251.0415 = $2,251.04 million

So, if Revenue = 1, then Net Income is $2,251.04 million.

(a-2) Regression equation is as follows -

Net Income = 2,251 + 0.0415Revenue

The slope of this equation is 0.0415.

As slope is positive, this implies that Net income will increase as Revenue will increase.

Thus, the correct answer is option (2).

(b) Net income is total revenue minus total cost. Given regression equation shows that even if revenue is zero, we will get a net income of $2,251 million.

So, if total revenue is zero then net income has to be negative. However, as regression equation is provding a positive net income, it can be said that intercept is not meaningful.

Hence, the correct answer is option (2).

(c) Regression equation is as follows -

Net Income = 2,251 + 0.0415Revenue

If Revenue = $20,256

Net Income = 2,251 + 0.0415*20,256 = 2,251 + 840.624 = $3,091.62 million

So, if Revenue = 20,256, then Net Income is $3,091.62 million.

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