Reference no: EM13200189

The following is output from regression analysis performed to develop a model for predicting a firm'sPrice-Earnings Ratio(PE) based onGrowth RateandProfit Margin.
Regression Analysis: PE versus Growth Rate, Profit Margin
The regression equation is
PE = 7.40 + 0.948 Growth Rate + 0.0562 Profit Margin
Predictor Coef SE Coef T P
Constant 7.401 1.896 3.90 0.002
Growth Rate 0.9485 0.1396 6.79 0.000
Profit Margin 0.05621 0.03952 1.42 0.180
S = 1.37576 R-Sq = 80.2% R-Sq(adj) = 76.9%

Analysis of Variance
Source DF SS MS F P
Regression 2 91.939 45.969 24.29 0.000
Residual Error 12 22.713 1.893
Total 14 114.651

1.) The adjusted R-squared is preferred in multiple regression because
I. it tells us if the regression model is significant overall.
II. it imposes a "penalty" for each new predictor variable added to the model.
III. it is always higher than R-squared unadjusted.
A)I only
B)II only
C)II and III
D)III only
E)I, II, and III

2.) Based on the F-statistic and associated p-value, we can conclude at = 0.05 that
A)none of the independent variables in the model are significant.
B)all independent variables in the model are significant and the regression equation is
significant.
C)the regression equation is not significant.
D)all independent variables in the model are significant.
E)the regression equation is significant.

3.) Which of the following is the correct interpretation for the regression coefficient ofGrowth Rate?
A)The regression coefficient indicates that the PE ratio of a firm that with a higher growth rate will, on average, be 0.948 points times lower than a firm with a lower growth rate.
B)Given the same profit margin, the PE ratio of a firm will be 0.948 points lower, on average, for each percentage point increase inGrowth Rate.
C)The regression coefficient is not significantly different from zero.)
D)The regression coefficient indicates that the PE ratio of a firm that with a higher growth rate will, on average, be 0.948 points times higher than a firm with a lower growth rate.
E)Given the same profit margin, the PE ratio of a firm will be 0.948 points higher, on average, for each percentage point increase inGrowth Rate.

4.) At = 0.05 we can conclude that
A)Growth Rateis not a significant variable in predicting a firm's PE ratio.
B)the regression coefficient associated withProfit Marginis significantly different from zero.
C)Profit Marginis a significant variable in predicting a firm's PE ratio.
D)the regression coefficient associated withGrowth Rateis not significantly different from zero.
E)the regression coefficient associated withGrowth Rateis significantly different from zero.