The following is output from regression analysis performed to develop a model fo
ID: 3158528 • Letter: T
Question
The following is output from regression analysis performed to develop a model for predicting a firm’s Price-Earnings Ratio (PE) based on Growth Rate, Profit Margin, and whether or not the firm is Green (1 = Yes, 0 = No).
The regression equation is
PE= 8.04 + 0.757 Growth Rate + 0.0516 Profit Margin + 2 .09 Green
Predictor Coef SE Coef T P
Constant 8.043 1.570 5.12 0.000
Growth Rate 0.7569 0.1355 5.59 0.000
Profit Margin 0.05162 0.03239 1.59 0.139
Green? 2.0900 0.7945 2.63 0.023
S = 1.12583 R-Sq = 87.8%
Analysis of Variance
Source DF SS MS F P
Regression 3 100.709 33.570 26.48 0.000
Residual Error 11 13.942 1.267
Total 14 114.651
Based on the F-statistic and associated p-value, we can conclude at = .05 that all independent variables in the model are significant and the regression equation is significant.
Using the regression output given above, at = .05 we can conclude that:
A. Growth Rate is not a significant variable in predicting a firm’s PE ratio.
B. Profit Margin is a significant variable in predicting a firm’s PE ratio.
C. The regression coefficient associated with Growth Rate is not significantly different from zero.
D. Whether or not a firm is Green is significant in predicting its PE ratio.
E. The regression coefficient associated with Profit Margin is significantly different from zero.
Explanation / Answer
Using the regression output given above, at = .05 we can conclude that:
B. Profit Margin is a significant variable in predicting a firm’s PE ratio.
we canc onclude that because p value is lower than 0.05 so the analysis is significant
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