What Is Accomplished by Using a Tobit Model Rather Than

question 14

Multiple Choice

What is accomplished by using a Tobit model rather than the least squares estimator?

• A)it generate unbiased and consistent estimates on censored data
• B)it corrects sample selection bias
• C)it allows for choice models to be estimated using GLS
• D)it generates the same unbiased coefficient estimates,but with smaller variances

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Definitions:

Capital Spending

Expenditures by a company for the acquisition or improvement of long-term assets such as property, plants, and equipment in order to expand its operations or efficiency.

Sunk Cost

Costs that have already been incurred and cannot be recovered, and thus should not influence current/future business decisions.

Capital Budgeting

The process a business undertakes to evaluate potential major projects or investments, focusing on analyzing future cash flows and profitability.

Discount Rate

The yield rate utilized within DCF analysis for determining today's value of future cash movements.