The regression equation NetIncome = 2,159 + 0.0312 Revenue was estimated from a

Question

The regression equation NetIncome = 2,159 + 0.0312 Revenue was estimated from a sample of 100 leading world companies (variables are in millions of dollars). (a-1) Calculate the residual for the x, y pair ($45,533, $2,697). (A negative value should be indicated by a minus sign. Round your answer to 4 decimal places.) Residual (a-2) Did the regression equation underestimate or overestimate the net income? The regression equation overestimated the net income. The regression equation underestimated the net income. (b-1) Calculate the residual for the x, y pair ($60,417, $3,497).(A negative value should be indicated by a minus sign. Round your answer to 4 decimal places.) Residual (b-2) Did the regression equation underestimate or overestimate the net income? The regression equation overestimated the net income. The regression equation underestimated the net income.

Explanation / Answer

Solution:

a-1 When Revenue = 45,533, the Net Income would be

Net Income = 2159 + 0.0312 (45533) =3579.63

Residual = 2697 - 3579.6296

Residual = -882.6296

a-2: Since actual is less than expected, the regression equation overestimate the net income.

b-1:

When Revenue = 60417, the Net Income would be

Net Income = 2159 + 0.0312 (60417) =4044.0104

Residual = 3497 - 4044.0104

Residual = -547.0104

b-2: Since actual is less than expected, the regression equation overestimate the net income.

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.